Your Survival Guy

Preparing your investments and family for when disaster strikes.

Disclosure

Despite Past Failure, Connecticut Taxes More and More

By

By Jeffrey M. Frank @ Shutterstock.com

Despite what seem to be ever increasing taxes, Connecticut’s politicians can’t seem to pay for all their spending. Every time taxes go up, more of the state’s wealthy residents decide it’s time to pick up and leave.

Now, Connecticut is trying to adapt. Rather than raising headline rates on income or sales, Hartford’s Regents of Revenue are creating a slew of new taxes on the edges of noticeability. The Middletown Press explains this new assault on Nutmeggers, writing:

The sales tax on digital downloads — things like e-books and movies downloaded from Amazon — will increase from 1 percent to 6.35 percent, bringing in $27.5 million in the first year and $37.1 million in the second.

Prepared foods such as restaurant meals will be subject to a 1 percent tax, generating $48.3 million for the state in the first year of the biennial budget and $65.8 million in the second year.

The sales tax will be expanded to include parking, dry-cleaning and laundry services, and interior design services. That’s far less than Lamont had hoped for. He’d originally proposed expanding the sales tax to all services. The sales tax expansion will generate an additional $11.8 million in the first year and $24.4 million in the second year.

The budget will also lower the threshold to collect online retail sales tax — out-of-state sellers are considered a retailer for Connecticut sales and use tax purposes after 200 or more retail sales and $250,000 in gross receipts in a 12-month period. The change lowers the threshold in gross receipts to $100,000. The change is expected grow online sales tax receipts by $1.5 million in the first year and $2 million in the second.

The largest single increase is a reduction in a tax credit available to partnerships and small corporations, netting the state about $50 million. The tax credit was created in 2018 after all “pass-through” companies — those that pass profits to their owners rather than pay corporate taxes — were charged 6.99 percent on profits, and their owners were exempted from the state income tax. All of these business owners save on federal taxes in the switch, and the new budget removes about one-quarter of that savings by reducing the income tax credit.

A mandated occupancy tax on short-term rentals operated through online platforms such as Airbnb is expected to generate $1.5 million in the first year and $2 million in the second year of the budget.

In 2020, homeowners moving out of state and selling their house for more than $2.5 million will pay a new mansion tax, which increases the conveyance rate to 2.25 percent on those real estate sales. The change will generate $6.3 million in the second year of the budget.

The budget cancels a plan to eliminate the corporate surcharge tax, which will generate $60 million in the first year and $37.5 million in the second.

In a tax cut, the $250 “business entity tax” paid by all companies every other year is ended, saving businesses about $25 million a year.

The annual filing fee for LLC’s and LLP’s will increase in 2020, bringing in an additional $12 million to the state.

A tax on E-cigarette liquid at wholesale will generate $1.9 million in the first year and $2.5 million in the second.

The excise tax on alcohol will increase, bringing in an additional $3.8 million in the first year and $5 million in the second year.

A surcharge of 10 cents on disposable plastic bags will bring in $27.7 million in the first year and $26.8 million in the second year. An outright ban will go into effect in two years.

The fee for ridesharing services like Uber and Lyft will increase from 25 cents to 30 cents per ride, generating $4.5 million in the first year and $4.6 million in the second year.

The vehicle trade-in fee will increase, bringing in $7.4 million in the first year and $9.8 million in the second.

Repealing an income tax credit for STEM graduates will bring in $3.9 million in the first year and $7.0 million in the second year.

Did you notice in the midst of that long list that the state is even hitting wealthy residents as they leave the state? Perhaps it’s an admission the new taxes will drive even more people from Connecticut looking for a better place to live in retirement.

The following two tabs change content below.
My Twitter profileMy Facebook profileMy Instagram profile

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com