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In an effort to close the projected shortfall, Lamont is considering introducing legislation that would see sales tax on groceries and other long-exempt items, according to a ctmirror.com report. The move would come in an effort to “bring fiscal stability” to the state.
If approved by lawmakers, taxing groceries and other such items could generate hundreds of millions of dollars annually for the state, helping to reduce the projected deficit.
Although his first budget proposal isn’t due until next month, Lamont’s office has reportedly been searching for options to broaden the sales tax base. The Commission on Fiscal Stability and Economic Competitiveness has called for an end to most sales tax exemptions, though just a 2 percent tax on groceries.
According to the report, sales tax is projected to generate an estimated $4.2 billion during the fiscal year, second only to state income tax. If the exemptions are lifted, sales tax could generate an estimated $2.7 billion more for the state’s $20 billion budget.
Consumers would pay approximately $424 million more on groceries if the full 6.35 percent sales tax was applied. The exemption for prescription medication, syringes and needles saves shoppers between $387 million and $416 million depending on if tax break for over-the-counter medications is included.
States that currently tax groceries include: Alabama, Arkansas (3 percent), Hawaii, Idaho, Illinois (1 percent), Kansas, Mississippi, Missouri (1.225 percent), Oklahoma, South Dakota, Tennessee (5.5 percent), Utah (1.75 percent), Virginia (1.5 percent), and West Virginia (5 percent), according to the Tax Foundation.
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