HARTFORD, Conn. - Devotees of coupons and discounts are angry atGov. Dannel P. Malloy's proposal to slap a new sales tax on theoriginal price of a good or service rather than the discountedprice.
Ending the sales tax exemptions for coupons, discounts andautomobile trade-ins are among tax exemptions Malloy has proposedending to help close the state's projected $3.5 billion deficit. Forexample, the tax would be imposed on the $30 price of a blouse, notthe $15 sales price.
Gina Juliano learned firsthand after she lost her job in 2009 asa vice principal in the Hartford Public Schools that coupons andsales can help a family make ends meet. She cut her budget for food,toiletries, pet supplies and paper goods from between $200 and $300a week to $50.
"I turned to coupons because I would have had to lose my houseand everything. I wouldn't have been able to survive," said Juliano,who now writes a blog in Connecticut called Gina's Kokopelli thattracks coupons, sales and bargains for other shoppers.
Like many avid couponers, Juliano pays little or nothing foritems after matching coupons with sales. For example, she recentlyused a $3 coupon to buy a bottle of Gain fabric softener that was onsale for $2.99 at Rite Aid.
"Under his proposal, I would have to pay tax on that, which isnot right because I didn't pay for the item," said Juliano, who runsclasses on couponing. "Everybody who does this, it's not likethey're rich. They're doing this to survive."
Benjamin Barnes, Malloy's budget chief, isn't a particular fan ofthe proposal. But because of the state's deficit woes, theadministration is forced to examine the numerous tax exemptionscurrently on the books.
"It's true, it's a new tax. It sucks," he said. "Every single oneof those, however many, 20-odd taxes is a new tax and it sucks. Idon't know how to hide it. These are new taxes."
Food items under Malloy's budget would continue to be exempt fromthe sales tax and therefore not affected by the proposed coupon anddiscount exemption rollback which is projected to bring in $92million in revenue over the two-year, nearly $40 billion budget. Thecoupon exemption is among many sales tax exemptions the new governorhas proposed ending.
Malloy has also proposed raising the sales tax rate from 6percent to 6.35 percent for retail purchases and ending the $50exemption for clothing and footwear.
Kristen Ellis, a Connecticut blogger who writes"Funbeingfrugal.com" about ways to live inexpensively, said she andher husband are on unemployment compensation and have to countpennies and carefully plan their shopping.
"How can you tax me on what I did not spend? The short answer is,you can't," she said.
Ellis cites legal definitions of a "sales tax" and how theyindicate a sales tax is to be levied on the sale price paid byconsumers. She also cites a state law that says "all coupons andscan cards reduce taxable price."
"If Mr. Malloy follows through with this proposal, he is openinghimself and the state up to legal action," Ellis wrote on her blog.
Barnes said the administration will need to change state law tocollect taxes on the pre-discounted amount. "We can't do it byadministrative fiat," he said.
Timothy Phelan, president of the Connecticut Retail MerchantsAssociation, said he's concerned that many of the exemptions Malloyhas proposed repealing - proposals to raise the sales tax and luxurytax - will affect retailers. Shoppers may instead buy on theInternet where sales taxes are not charged on many items, he said.
"It's a loss for the state because they won't get that sales taxrevenue and it's certainly a loss for the retail community," Phelansaid.
Car dealers also are concerned about Malloy's plans to end thesales tax exemption for auto trade-ins, a proposal that would raise$81.8 million over two years. Currently, consumers pay tax on a newcar minus the value of a car they are trading in to the dealer.Under this proposal, that trade-in - essentially a coupon againstthe price of the new car - would no longer count.
James Fleming, president of the Connecticut Automotive RetailersAssociation, said he believes such a move will make it moredifficult for consumers to qualify for a car loan because they oftenuse the value of the trade-in toward a down payment. Under Malloy'splan, the trade-in value would be reduced by the sales tax.
"My dealers will say people will walk out of a showroom over a$20 a month increase in a car payment," he said.
Connecticut residents will ultimately have to pay the tax if theybuy the car from an out-of-state dealership, but Fleming said it'sbeen shown in other states that those consumers will go to that out-of-state dealership for repairs and oil changes. He estimatesMalloy's proposal could lead to possibly 500 layoffs across thestate.
"The experience in other states is it's a loser. It's a big, bigloser," he said.
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