New sales taxes shouldn’t target poorest
It’s accurate to say the state sales tax has not kept up with changing technology.
Gov. Ned Lamont made this point Wednesday in announcing his two-year budget plan. “Our current sales tax is designed for a Sears Roebuck economy driven by over-the-counter sales,” he said in his budget address. “Today we live in an Amazon economy, which is driven by e-commerce, digital downloads and consumer services.”
On the other hand, it seems clear people have been getting haircuts since long before Amazon came around.
Lamont’s chief means of increasing revenue in his budget comes from expanding the sales tax, and in many cases that entails charging a levy on goods and services whose exemptions are hard to justify. Dry cleaning, coin-operated laundry, massage therapy and, yes, haircuts — what makes these services different from others that aren’t taxed? It’s never been clear.
“Really the goal here is to level the playing field and have an equal tax treatment of both goods and services,” said Melissa McCaw, secretary of the Office of Policy and Management.
Again, that sentiment is defensible, and widening the sales tax base would without question increase revenue.
It would also hit hardest the people least able to pay more.
Sales tax is among the most regressive in the government playbook. It stands to reason that a poor person paying 6.35 percent on a $100 purchase is hurt more than a rich person paying the same amount. It’s a greater share of someone’s purchasing power. That’s why income taxes have graduating marginal rates, meaning people pay more who can afford to pay more.
Lamont, though, ruled out on the campaign trail raising the income tax on high earners, as some in his party have been seeking. Unlike his pledge not to charge tolls to cars, this is a campaign promise he appears to be keeping.
And even with a 50 percent discount to state drivers, tolls are another highly regressive charge. It takes a much bigger bite of a low-income driver’s income than that of someone who’s rich.
It’s not that all the proposed tax changes are a bad idea. A 1.5 cent per ounce tax on drinks with added sugars, the so-called “soda tax,” would raise revenue as well as encourage people to spend less on unhealthy beverages. Republicans may have been trying to be funny by bringing Big Gulps to Lamont’s address in protest of this move, but mostly it looked juvenile.
Still, there is a balance to be struck. Raising the sales tax on boats makes sense. Raising taxes on textbooks does not.
As the Legislature takes up Lamont’s plan, it needs to ensure the burdens are not falling too heavily on the poor and middle class. If an increase in the income tax is off the table, extending the sales tax to services most often used by the rich should take greater precedence.
Hitting the poor with added costs for essential services shouldn’t be an option.