When politicians and their taxes invade your home

By Tom Phelan - ReminderNews
Feature Article - posted Fri., Jul. 8, 2011
Contributed
- Contributed Photo

Usually in this space I talk about home invasions by insects, vermin, water, smells and the like. This time around, though, let's consider an invasion of a different sort. It's the “elephant in the room” that everyone knows is there but can't see.

The political cauldron in Hartford is still a-boil, and some things might still change. But significant changes to the state’s tax system have already gone into effect, and every homeowner in the state will begin to see the “elephant,” as a year of added taxes and increases wears on. Feeding on your household budget dollars, the “elephant” will grow larger and larger. It's only a matter of how well your house holds up under the strain.

No doubt you have heard the chatter online, in the newspapers and on TV and radio. If you have tuned it all out, let me provide you with a recap and a sense of the impact it may have on your home and your household budget.

If you have been accustomed to claim your property taxes as a credit on your state income tax return, you are probably aware that you could claim a $500 credit. When you do your taxes for 2011, the maximum credit shrinks to $300. This is the most straightforward and quantifiable impact of all the changes implemented on July 1, 2011, and later. As such, it seems somewhat innocuous.

The increase in Connecticut state sales tax is one that your household finances will feel over and over again, this year and beyond. As a percentage, it, too, seems a bit innocuous. The general sales tax has been increased but a mere $.0035 on every dollar you spend. That raises it to 6.35 percent, but now it applies to several more items than the old rate did.

A few examples will help put things into perspective.

For the sake of argument, if you are finishing off a 12x16 room in the basement, just the sales tax on your drywall and related components might total about $12.90.  Now estimate the cost of flooring, paint and/or wallpaper, lighting, heating and furnishings. Total all your estimated costs, and multiply it by $.0635. Every renovation you do, no matter how large or small, will cost a little bit more this year.

If your household consumes $500 per month on food from the grocery store, you will fork over $381 in sales tax over the course of the next 12 months.

Until July 1 of this year, you paid no sales tax on items of clothing that sold for under $50. Now those rain boots, pants, pajamas, etc., will be subject to sales tax right from the first penny. So add another $3.18 to every $50 clothes purchase. Unfortunately, this is not the only sales tax exception we have lost.

Other sales tax exceptions that have been repealed include the purchase of non-prescription medicines and drugs, as well as products that would help you stop smoking. If you are a smoker, you already know your habit now costs you another 40 cents per pack, due to the tax increase just implemented. Whether you smoke or try to quit smoking, you are going to pay more tax.

Gone, too is the exception for any cloth, fabric and yarn sold for non-commercial use. So even if Mom plans to make some of the lower-priced items that are now subject to the sales tax, she will have to pay sales tax on the goods she uses to make those clothes.

The present "sin tax" on alcoholic beverages increases by 20 percent. So if all these tax increases make you cry in your beer, be advised those suds, even before you water them down, will cost you even more.

Connecticut has had a real estate conveyance tax for some time. This is imposed at the time you execute documents to sell your home. As of July 1, the half-percent tax jumps to three-quarters of 1 percent on home sales less than or equal to $800,000. Any portion of the sale value in excess of that amount will be taxed at 1.25 percent. On a $400,000 home sale, the conveyance tax is $3,000.

You will be able to see the impact of the income tax changes on your pay stub. The newly taxable sales and increases in the sales tax will show up on your register receipts. But take a close look at your electric bill, too. A new tax on electric generation of $.0025 per KWH will show up on your monthly bill, based on the amount of energy your electricity generation provider has uploaded to the grid. Another $2.50 for every 1,000 kilowatt hours doesn’t seem like much. But you can add it to the other new and increased taxes that affect every household in the state, and watch that elephant grow.


Home
Let us know what you think!
Please be as specific as possible.
Include your name and email if you would like a response back.
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
y
h
a
d
b
k
Enter the code without spaces and pay attention to upper/lower case.