STUMP » Articles » Taxing Tuesday: CT Legislators Don't Like to be Blamed for Taxes » 24 September 2019, 06:36

Where Stu & MP spout off about everything.

Taxing Tuesday: CT Legislators Don't Like to be Blamed for Taxes  

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24 September 2019, 06:36

Shocker, right?

Senate Dems say tax officials inflated prepared foods levy

Senate Democrats backed away Monday from the new sales tax surcharge on prepared foods, saying Gov. Ned Lamont’s administration made it far broader in scope than lawmakers intended.

The announcement comes on the heels of objections raised last week by House and Senate Republicans, as well as new cost projections from nonpartisan staff that showed consumers will pay $44 million more than originally projected over the next two years.

“We were shocked to see the DRS has somehow interpreted the language in the budget to significantly broaden the base on what meals and beverages could be covered by the sales tax,” Senate President Pro Tem Martin M. Looney, D-New Haven, and Senate Majority Leader Bob Duff, D-Norwalk, wrote in a letter to Department of Revenue Services Commissioner Scott Jackson. “This interpretation goes against the legislative intent of the new law.”

I mean, the main thing is that people are pissed off. It kind of went this way with soda taxes in Cook County, too, remember?

The sticking point:

Based upon the policy statement, OFA projected the tax would generate $158 million over this fiscal year and next — nearly 40% more than lawmakers anticipated. By 2020-21, consumers would pay more than $90 million per year.
…..
Senate Democrats have asked the department to issue a revised policy statement.

Max Reiss, communications director for Gov. Ned Lamont, said the administration is reviewing the letter from Senate Democrats.

The administration said many tough choices were made last spring when the governor and legislature approved a new, two-year state budget. That plan averted a projected deficit of more than $3 billion, and did so without increasing state income tax rates.

And did so by increasing a bunch of other taxes, and creating new ones.

Look, they wrote the dang bill. Here’s a piece about the bill wording:

A provision of the budget adopted in June does two things: Effective on Oct. 1, it increases the sales tax on meals by one percentage point, from 6.35 percent to 7.35 percent; and it explicitly lumps in grocery stores with restaurants and caterers when it comes to the taxation of meals.

The definition of meal is unchanged and requires a mere 25 words in state law: “ ‘Meal’ means food products which are furnished, prepared or served in such a form and in such portions that they are ready for immediate consumption.”

The law then offers 28 words of additional guidance: “A meal as defined in this subsection includes food products which are sold on a ‘take out’ or ‘to go’ basis and which are actually packaged or wrapped.”

A can of Coke satisfies this — you can consume that immediately. Hell, most of the food I buy at grocery stores — boxes of crackers, can of nuts, etc. — are items I use for snacking. I can start eating it right in the car. What the hell, CT?

Quit blaming the tax authority for extending the definition to every food product that satisfies this definition.

EVEN MORE CT TAXES

So, this one hasn’t gotten so many complaints…. yet.

I just got an email from a service provider I use for work. I will just copy up to the point before the provider is identified:

Dear Mary,

Connecticut is changing the sales tax rate on digital goods and services. On October 1, 2019, new legislation will raise the sales tax on these items to equal that of the full state sales tax, rather than the 1% rate at which it is currently taxed. This impacts all digital goods or services sales with a billing address in Connecticut.

What does this mean for you?

Beginning on October 1, 2019, you will see a different sales tax rate on your bill from us on items categorized as digital goods and services. To be in compliance with this new law, [provider omitted] will start charging a 6.35% sales tax to our members who have a Connecticut billing address on such digital items.

It went from 1% to 6.35%.

That’s an increase of not 5.35% [though yes, 5.35 percentage points]…. it’s an over-500% increase.

I am keeping an eye out to see if people complain about this, too.
So as not to clutter the below, here are all the CT tax stories I came across this past week:

Again, DRS didn’t write the bill. Given the language I saw above, it sounds right to me. The legislature and governor will have to fix the language, if they don’t want the result.

Because I interpret the language the way the DRS did.

AN IDEA FOR THE CT GOVERNMENT

Some people who have direct experience told me that in some countries (China and India were explicitly named), they give out awards to top tax-payers, no joke.

One person was able to share such a certificate with me:

Oooh, a bronze award!

But seriously, wouldn’t it be great to have an annual award ceremony celebrating the biggest taxpayers for a specific polity? [yes, some would decline, so let that lay low. But others may welcome the attention.]

Make it a gala event! Show the love!

It reminds me that the top public people in the Roman Empire would fund public buildings and entertainment, and get their names plastered all over it. Maybe we should do that with the government budget as well. Give the top taxpayers a menu of choices, based on their amount — they could be the sponsor for the state patrol that year, say, or the state subsidy for UConn.

I think Connecticut would be a great state to try that out with first, given all the really rich folks there and how difficult a time the state is having with taxes. Let’s think outside the box!

Here’s a story from China in 2007: Beijing gives award to millionaire taxpayers

The Chinese capital has awarded 10 of the city’s 387 taxpayers who each paid more than 1 million yuan ($130,700) in tax last year with certificates as a way of encouraging honesty, Chinese media reported.

One of the 10 — including movie stars, real estate developers and artists — paid 27 million yuan in tax, becoming the capital’s highest taxpayer, according to the Beijing Times.

In total, the 387 people contributed 950 million yuan in tax last year, it said.

“The honest tax-paying behavior of these people will win them more opportunities and respect in their future work and life,” the newspaper quoted Hao Shuobo, the deputy head of Beijing’s Taxation Bureau, as saying.

You wouldn’t even have to violate privacy — just send the award straight to the taxpayer, and a thank you note, and the person can decide whether to publicize the award themselves. The person who told me about this practice said they had seen these certificates up on the walls of various factories.

Social proof!

TAX STORIES

So, maybe you’re thinking a wealth tax would incentivize wealthy people to create big non-profits to park their assets in [and have family on the board, and get salaries, and…]

In the past year, a massive, predominantly left-wing backlash to mega-philanthropy has broken out. Writers like Anand Giridharadas, Rob Reich, and Rutger Bregman have turned the idea that philanthropy is taking on tasks that are properly the role of government — and allowing the rich to expand their influence and avoid taxation in the process — into a mainstream critique, one that major philanthropists have been forced to answer.

Well, jeez, if you want the rich people to “contribute” more to government coffers, perhaps you should think about that award idea above.

The new paper considers even bolder options: A “radical” wealth tax of 10 percent of wealth over $1 billion that’s meant to gradually draw down the wealth of billionaires, and a “confiscatory” tax of 90 percent on wealth over $1 billion meant to raise huge sums of revenue all at once and then (by setting a de facto maximum wealth level) never again.

Most strikingly, from a philanthropic perspective, Saez and Zucman propose making foundations and donor-advised funds subject to the wealth tax if they are still controlled by their wealthy benefactor. The Bill and Melinda Gates Foundation would be treated the same as Bill and Melinda Gates, individually. To avoid the tax, the foundation would have to either (a) put people other than the Gates in effective control or (b) spend its philanthropic funds quickly.

Well, good luck with that.

I worry about this effect a lot. As my colleague Kelsey Piper has argued, it’s actually quite difficult to find useful philanthropic opportunities and forcing people to spend down rapidly could lead them to give subpar donations. It’s easier to just empty a dump truck of money at Lincoln Center than it is to design an effective anti-malaria intervention.

At the same time, the volume of giving would increase — and if giving shifts to nonprofits that aren’t controlled by donors and are thus exempt from the wealth tax, those nonprofits could conceivably take over the task of researching effective interventions and gradually spending on them.

You know, those wealthy folks might not “control” the funds, but they sure as hell would be on the boards… or, more specifically, if the non-profits these wealthy folks don’t control want more of that sweet sweet rich person money, they’re going to have to cater to their desires.

This is silly.

TAX TWEETS

From a very angry taxpayer:

I like how I get a more diverse selection of tweets if I look for them when I wake up, as opposed to looking for them in the middle of my day. I get a lot of non-US stuff then.

HAHAHA — what was that about high-income people getting the big tax break? Tell it to New York.


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