Legislation to exempt baby diapers from Connecticut sales tax could potentially cost the state $4.3 million annually in lost revenue if it becomes law, according to the state Office of Fiscal Analysis.
The bill was referred Tuesday by the House of Representatives to the Finance, Revenue and Bonding Committee. It originated in the Children’s Committee, where all 13 members voted in favor of it in March.
The actual fiscal impact the bill could have on the state budget remains unclear due to aspects of Gov. Dannel Malloy’s proposed budget.
As state statute stand now, articles of clothing and footwear that cost less than $50 will be exempt from sales tax beginning July 1. The Department of Revenue Services considers baby diapers to be clothing, so if the statute stands diapers would be exempt anyway and the bill would have no fiscal impact on the state.
However, Malloy’s proposed budget includes eliminating that tax exemption for clothing and footwear costing less than $50. If that were to happen, diapers would remain taxable and enacting separate legislation to exempt them would cost the state $4.3 million in both the 2016 and 2017 fiscal years, according to the recent nonpartisan analysis done by OFA.
In Connecticut, baby diapers currently are taxable while adult diapers are tax exempt. That is because the Department of Revenue Services considers baby diapers, both disposable and cloth, as clothing while adult diapers are exempted as a medical supply associated with incontinence.
The bill to make baby diapers exempt is being spearheaded by Rep. Kelly Luxenberg, D-Manchester, and Sen. Mae Flexer, D-Killingly.
Any bills that would reduce revenue coming into the state likely face an uphill battle at a time when lawmakers are trying to close a ballooning budget deficit.
State Comptroller Kevin Lembo estimated the state would end the year with a $172.8 million deficit. Last week, legislative analysts pegged the deficit at $191 million.
But for families in the state struggling to make ends meet, exempting diapers from sales tax could provide a bit if much-needed relief, said Janet Stolfi Alfano, executive director of The Diaper Bank. The North Haven-based nonprofit works to increase access to and provide diapers to those who cannot otherwise afford them.
“While it seems like a lot of money for the state to bear, think of the expense the families are enduring to provide this basic need,” she said.
Diapers are a continuous need during a child’s first three years, she said.
Going without diapers can have serious negative consequences, according to The Diaper Bank. In addition to various health problems, a lack of diapers can prevent caregivers from accessing childcare, since most require that be left with the child.
The poorest families in the state typically don’t have access to places where they can buy diapers more cheaply, places like discount clubs or online, according to Alfano.
Low-income families that are part of the Supplemental Nutrition Assistance Program, formerly known as food stamps, can not use SNAP benefits to pay for diapers under the program’s guidelines.
The OFA analysis shows families collectively are paying more than $4 million a year in just the sales tax on diapers alone, she added; that doesn’t take into account what they pay for the diapers themselves.
A pack of 32 diapers typically costs around $9. Connecticut’s 6.35-percent sales tax adds another 57 cents to the cost.
“It’s extraordinarily important that the state takes care of its most vulnerable citizens,” Alfano said, and the state’s financial problem “does not mean that we can place the burden of fixing that on those who are most vulnerable.”
Eliminating the tax “would be a huge help for families,” Flexer said. “Families with young children are really struggling. Diapers are a huge burden for them. Anything we can do to put a little more money in their pocket is tremendous.”
It is also important to exempt baby diapers from tax, even if it costs the state money, because adult diapers are exempt, she said.
“We need to be consistent,” Flexer said.
Most states tax baby diapers, according to a 2012 survey by The National Diaper Bank Network, which is based in New Haven.
Connecticut is one of three states that tax baby diapers but not adult diapers, according to the survey. The other two states are Maryland and North Dakota.
Seven states exempt baby diapers from tax, including Massachusetts, Rhode Island and Vermont in New England, according to the group. And there is no tax on diapers in Alaska, Delaware, Montana, New Hampshire or Oregon as those states have so sales tax on any items.
Of the states that do tax diapers, more than a dozen include them in annual sales tax holidays, according to the survey.