Grocery sales tax: Connecticut is a high tax state. A troubling recommendation has emerged from a report commissioned by the legislature to end the exemption of groceries from sales tax. The idea of including groceries in a broad-based sales tax is not helping Connecticut’s tax and spend reputation.
It is true that the state is in a tough spot fiscally. The state holds the fourth largest unfunded pension liability in the country and is facing almost a two-billion-dollar deficit in the coming fiscal years. The mixed response from residents on proposed solutions- including an installation of toll roads- to help prop up budget do not lend to an expedient solution.
This type of regressive taxation scheme does not address the underlying fiscal woes that ail the state. It is a poorly targeted tax, groceries are a much larger share of income for lower- than higher-income households. Taxing groceries is going to be especially hard on middle income families. Low income families who qualify for food stamps (SNAP) will be partially insulated from the tax increase because federal law prevents taxing of items purchased with those benefits.
The total expected revenue of $444 million is paltry in comparison to other possible revenue sources, such as increasing the highest income tax rates. Only seven other states subject groceries to sales tax. I am not against taxation of some food items, taxes on sugary beverages or candy can help to dissuade excessive consumption. Some taxation schemes have proven to be effective like the gas taxes to help pay for our roads, but this scheme is more punitive to consumers than anything.
The “grocery tax” is a far cry from a specifically targeted tax to reduce consumption, it is a grab at consumers wallets to try and balance the budget. Certainly, steps need to be taken to put Connecticut back on a more sustainable fiscal track but squeezing the citizens every time they buy a gallon of milk is not the answer.