State Set To Begin Tax-Free Week Despite Budget Woes

Even as Connecticut faces a deficit of $3.5 billion over the next two years, the state is poised to give away a projected $4.1 million in unclaimed sales tax during next week's sales tax holiday.

During the holiday, which was established by state statute in 2000 and runs this year from Aug. 20-26, certain items of clothing, footwear and accessories under $100 will be exempt from the state's 6.35 percent sales tax.

"The idea was to give parents a break on things one would use and need at back-to-school time," said Kevin Sullivan, commissioner of the Department of Revenue Services.

But with the state currently in a long-running fiscal stalemate with no budget, some are questioning whether the week should exist.

"I don't see a particularly good reason to continue it now, particularly because I'm getting hammered by non-profits,'' said state Rep. Josh Elliott, a liberal Democrat who is a vice chair of the legislature's tax-writing committee.

Elliott and other legislators are hearing repeated complaints from non-profit organizations that hold state contracts but have not been paid the full amounts because of the state's ongoing budget crisis. Numerous school districts have placed jobs on hold, and the non-profits are planning more unpaid furlough days and potential job eliminations as the state faces a projected deficit of $3.5 billion over two years. The state has been running under Gov. Dannel P. Malloy's executive order as lawmakers continue struggling to compromise on a budget.

"If we don't have something soon, there's going to be layoffs,'' Elliott said of the non-profits. "Having a tax-free holiday seems to ignore that fact.''

Kelly Donnelly, a spokesperson for Malloy, said that regardless of Connecticut's budget woes, the governor could not do away with the tax-free week by executive order.

"Operating under executive order, the governor is constrained as to what he can do to allot funds," she said. "One of the things he cannot do is change statute."

Connecticut's retailers are bullish on the tax-free week, noting that lawmakers declined to vote to eliminate the popular program.

"Every year, the legislature has to make decisions during the session, and this year they decided they wanted to keep the sales-tax free week on the books,'' said Timothy G. Phelan, the longtime president of the Connecticut Retail Merchants Association. "That was a good decision. We think it's a win for everybody.''

The state tax department released a list of more than 60 different items that will be tax-free, including leg warmers, boots, and pajamas. Items like adult and children's diapers, kitchen aprons, baseball caps, handkerchiefs and children's bibs are often not widely considered to be clothing, but they're tax-free next week.

But items such as handbags, purses, jewelry, ice skates, roller skates, sports uniforms, bowling shoes, and ski pants are still fully taxable.

House Republican Leader Themis Klarides of Derby said the tax-free week is "a net positive'' that could not be eliminated without looking at the entirety of the two-year, $40 billion budget that includes far broader issues like funding for the non-profits and educational cost-sharing funds for public schools in cities and towns. 

"You can't possibly look at it that way" as a single issue, Klarides said. "We're missing the bigger picture here."and

In the last few years, Sullivan said the state lost between $4 million to $5 million each year in uncollected sales tax. "We always hope there's other things that make up for it, but they're hard to prove," he said. "People might discover a store that day and shop there for the rest of the year, develop a shopping relationship with that store."

Local storeowners were hopeful the holiday would nudge customers towards their doors.

In West Hartford's Blue Back Square, Ooh La La Boutique was conspicuously empty Wednesday morning, and Darlene Sonia, the store's owner, said her customers were holding out for the holiday.

"Local people will wait – they won't come this week – and they'll come Sunday and start shopping," she said. "Mothers will hold off on shopping until that week, especially if they've got two or three kids that they have to buy the shoes, the jeans, the backpacks for."

In the Old Navy across from Westfarms Mall, Esther Garcia was stocking up on the grey and blue polos her daughter, a sixth grader at Sunset Ridge Elementary in East Hartford, wears through each year.

"You have to do little by little; you can't really wait until the no sales tax week," she said. Next week is when she'll buy the pricier backpacks and shoes that yield bigger savings.

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