New, higher taxes go into effect

Friday marks the beginning of a slew of new and higher taxes.

The General Assembly, under the urging of Gov. Dannel P. Malloy, has approved sweeping new tax increases and eliminated many tax exemptions to plug up the state budget deficit.

Some 70 percent of the changes will cost consumers, if state revenue projections are accurate, about $1.42 billion in the coming fiscal year.

“We estimate this could cost the average family a little more than $1,000 a year in additional taxes,” said Fergus Cullen, executive director of the Hartford-based Yankee Institute for Public Policy.

The main changes include a hike in the state sales tax from 6 percent to 6.35 percent and the addition of hundreds of consumer items that were previously exempt from Connecticut’s sales tax, notably nonprescription drugs, some catalog and internet purchases, and clothing or footwear items costing less than $50.

The tax on cigarettes is going up 40 cents, above the current $3, and taxes on alcoholic beverages are rising 20 percent.

Diesel fuel taxes are increasing three cents a gallon, and although the state legislature balked at increasing gasoline taxes, the price of gas will still go up because it is subject to the sales tax.

Then there’s the so-called “Amazon” tax, which requires remote sellers without a physical presence in the state to collect Connecticut sales taxes. If the seller has retail affiliates in the state, they must collect them. If they don’t do it, the state Department of Revenue Services is authorized to collect the tax from the buyers who are based in Connecticut.

The big ticket item is a jump in the so-called “marginal” income tax rates, which the state hopes will alone pour $565 million into its coffers next year. The burden of calculating and enforcing these new rates, which are retroactive back to Jan. 1, primarily falls upon employers, who have been tasked with reconfiguring the withholding tax in paychecks.

Another big revenue earner is a drop in the states’ property tax credit from $500 to $300, expected to raise $151 million next year. The sales tax increase of little more than one-third of a percent is expected to generate another $138 million but will be partially shared with the municipalities.

New motor vehicle fees and removal of exemptions from the 10-percent admissions tax at 19 stadiums, speedways and convention centers around the state round out the new costs.

Retailers and companies will have to reprogram their cash registers and computers. They should not wait for formal letters from the state.

“It would be cost prohibitive to do targeted mailings, so we are depending upon organizations like the Connecticut Retail Merchants Association to spread the word among their members,” said DRS Communications Director Sarah B. Kaufman.

The full report on taxes is also available online at www.ct.gov/drs/site/default.asp