Taxes, Taxes and more Taxes

If you haven’t been following the news out of Hartford recently, be aware that the Democrats are thinking up many new ways to impose taxes.  These include not only increasing rates on existing taxes, but also the imposition of new taxes.  Among these include a statewide property tax on mansions.  These funds would be collected by the state government (which already collects income and sales taxes), and would not be used in the communities from which they were collected.

There is some good news: if you own a house in Ridgefield, you probably own a “mansion,” at least in the eyes of the Democrats.  The mansion tax would be imposed on all homes with a market value over about $430,000. 

There is also a proposal from Rep. Sean Scanlon (D-Guilford) to allow cities and towns to impose sales taxes and income taxes.  Thus, if the Democrats are successful with their proposals, cities and towns would collect property, sales and income taxes; the state would also be deriving taxes from all three sources.  Currently, the state does not collect property tax, and the cities and towns do not collect sales or income taxes.

Regardless of your thoughts of the merits of allowing cities and towns to collect sales and income taxes, there would be considerable problems with the implementation.  Connecticut has 169 towns, and since we’re the third smallest state, each town isn't that large.  You’d have sales tax rates changing every few miles.  Allowing each town to have a separate sales tax rate would make tax compliance exceedingly difficult for online merchants -- they'd need to track all 169 rates, and they'd need to use a geographic information system to track what town you actually lived in (the name of the town in your address isn't necessarily congruent with the actual town border: for instance, about 20 houses have Greenwich addresses but are actually in Stamford).  Another unintended consequence is that towns might be highly resistant to new supermarkets from opening (yielding minimal sales taxes, as groceries are exempt from taxation), while encouraging merchandise oriented stores to move in instead. 

As for income tax, it's unclear if this tax would be based on where you live or where you work.  So if someone lives in Ridgefield but works in Danbury, would they pay tax to Ridgefield or Danbury?  If it's the later, that's a lot of taxation without representation.  Many people in Connecticut cross municipal boundaries when they commute (and many of us may soon resume working in an office).  If it's the former, remember we have a lot of cross-border commuters in Connecticut, and since these commuters are already paying tax to NY State, they wouldn't pay local income tax in CT. 

Connecticut already has the dubious distinction of having the second highest taxes in the country. Many industries and companies have fled.  Over the last decade we lagged the nation in both job and wage recovery while our northeastern neighbors had robust growth. (CT Mirror)  The Democrats in power could change this by finding ways to get spending under control rather than raising and imposing new taxes.