It is great to talk about cutting sales tax rates, but maybe Connecticut needs to rationalize our sales tax system first, then change the rates.
Right now our rates are so confusing we do not qualify to join with more than 20 other states in the interstate compact for internet sales. That means out-of-state sellers get to undercut our homegrown retailers by 6.35% on every transaction. A healthy, vibrant economy is not encouraged or enhanced by giving out-of-state vendors a sizable discount to local sales outlets when consumers want the lowest total price.
If we were to make our sales tax system qualify for the interstate compact, Connecticut would reap approximately $150 million more in sales tax revenue. Moreover, it would ease the burden on state retailers by making it easier to understand what is taxable or not so the full tax was charged to support state programs and lowering the cost of business in the state (where we fair poorly on national rankings) by making compliance easier, more accurate and transparent.
Once the system was clear and transparent, then rates could be changed for the benefit of all taxpayers, or it could be used to support worthwhile causes –including state grants to lower the more repressive property tax burden that we all share.
Connecticut has cobbled together a variety of tax increases to satisfy its needs, but it is based on an 19th century system of subsistence agriculture. If there is surplus money, let’s fix the system to a modern, effective 21st century system before adjusting the rates. Otherwise, we still have an antiquated system that is not ready to deal with modern demands nor an economic downturn.