I have a very distinct recollection of how Thursdays worked in my house when I was a kid. You see, Thursdays were sales flyers days. My mom would look them over, comparing them to her grocery list and a big, fat stack of coupons she had carefully cut out from the prior Sunday (as well as under cereal boxtops and soup labels). My mom was thrifty. Very thrifty. And she was quite good at it. She had to be… There were five of us in the family, one of which was six foot tall and consumed a disturbing amount of dairy and citrus products in a week.
We could get in and out of a couple of stores under or at budget, thanks to a fancy LED calculator as big as my head, mom’s list and that stack of coupons. Wilson’s, our local grocery, offered double coupons on certain days: even better!
It was a skill I carried with me to law school. Once I managed to buy an entire cart’s worth of groceries for about $20, prompting the woman behind me to say, admiringly, “Girl, your momma raised you right.”
Indeed she did.
Lucky for us, we grew up in North Carolina and not in Connecticut.
Connecticut residents may soon learn that there’s no so lunch as a free – or discounted – lunch under Gov. Dannel Patrick Malloy (D). Malloy has proposed a new sales tax which would apply to the original price of a good or service, rather than the discounted price; this means that coupons and sales breaks would not apply for purposes of calculating the sales tax. Malloy figures this strategy will help close the deficit (*insert eye rolls from moms everywhere right here*).
Here’s how it would work… That cute pair of shoes at Macy’s you’ve been eying, waiting for the price to drop? Well, even if your $100 Calvins drop to $25, you’d be taxed on the original $100. That “50 cent off” coupon for dish detergent? It might be good at the Superfresh for purposes of a lower price at the register but you’re still on the hook for tax on the full priced item.
Wondering how much of a dent this nickel and dime tax will put in the deficit? Clearly not enough to justify the administrative headache. Malloy hopes the tax will bring in about $92 million over two years: the current deficit is $3.5 billion. The impact on the coffers works out to about 1% a year.
Is it worth it?
Better yet, is it legal?
Right now, not so much on either count. But that’s not stopping the governor.
And the tax increases won’t end with coupons and sales discounts. An existing law that allows a sales tax exemption for auto trade-ins is also on the hit list. Additionally, Malloy intends to raise the sales tax to 6.25% and eliminate the existing exemption for clothes and shoes.
It’s an interesting tactic for a governor who has been a vocal critic of the way that other governors have hoped to get out of fiscal crisis. Just last month, for example, Gov. Malloy railed against NJ Governor Chris Christie (R), saying, “[h]opefully I take a slightly more intellectual approach to this discussion than Governor Christie has demonstrated.”
Really, governor? Taxing sales items and coupons is what you consider a more intellectual approach to the budget crisis. Apparently, the discussions that go on at Yale, UConn and Quinnipiac are much, much different than I thought.
(Quick editor’s note: Readers who went to Yale have been quick to point out that Malloy did not go to Yale but rather, Boston College. I didn’t mean to imply that he went to Yale, Quinnipiac or UConn – merely that those are colleges and universities in Connecticut.)
Quite frankly, rather than an intellectual approach, this reeks of the desperate grab for state dollars that we’re seeing across the board in the US these days. Federal tax cuts make taxpayers happy. But what often goes unnoticed is that the federal government continues to mandate state programs that the states have to pay for – and the feds have cut dollars to those programs. So let’s do the math -> fed mandates + reasonable (or unreasonable, depending on your perspective) cost of state services + less federal money available + less state tax revenue in a down economy = a big problem.
If you believe Gov. Malloy, there’s an intellectual approach and a not-so-intellectual approach to the problem.
Guess which one Connecticut has chosen? Well, they’re filling the budget holes by taxing coupons, so you tell me.
Missouri used to include coupons in the sales tax amount. They called it “just another form of payment, like cash”. I’m not sure when it changed but I think that sales tax is now only collected on the final sale amount.
MO also used to collect sales tax on “rebates” from auto makers. Some years ago a Missouri attorney sued when his daughter was charged sales tax on a several thousand dollar rebate and got that changed. I first noticed that in 1996 when I saw that I paid no tax on a $2500 GM Card rebate on my 96 Pontiac. In my opinion this was a gift because credit card “earnings” is really another form of payment, while a mfg price reduction rebate is not.
Maybe the coupons were in the “rebate” ruling.
Regards
David
You’re right, this is another step beyond the logical. Some states already tax on the value of coupons where the manufacturer is reimbursing the store (“You pay the sales tax”), but store discounts and coupons have always been seen as price negotiation or similar.
If our country has forgotten how to negotiate… what is more progressive than to tax fixed prices?
I like that you explained one major reason that states are so constrained. It’s true and is one reason I keep saying we need to decrease the size of the federal government. Federally-mandated equates to Federally-controlled on some scale.
YES! Those coupon were a part of the food budget, just like the JC Penney discounts on sales days that required the coupons. One would reasonable say that the store reduced it price to lure customers. The final price of the sale should be the taxed portion, not the original price as I presume the Govenor of CT is asking to be done. Coupons are mark downs, just like sale coupons used at the department stores. Seems CT is trying to get businesses to do the under-handed taxation, and make the stores the collection agency. Maybe CT should look at their spending habits, not how to collect more taxes. Also appears CT is anti-business as they burden the stores with more cumbersome tax colelction methods.
In 1960, NC began taxing food just like all purchases, @4%. It was a temporary tax that stayed for three plus decades. Passed by “trust me” politicians. But when the Legislature developed enough back-bone and decided to reduce the sales tax on food, it cut it to 2%, with all other items still taxed at the state rate and also the county sales taxes that became popular some decade or so ago, that now totals @7.5% to 8.5% in some counties.
Jsut like family budgets, spending for the right things are necessary. States should be doing the same, instead of same old spending and spending habits.
Since the cost of producing the coupon is typically a marketing expense and not a cost of goods sold, there should be an issue with trying to tax the “fair value,” which is actually the price paid. As an act of civil disobedience, everyone should offer everyone else their favorite tissue (used) for $1,000,000,000,000,000,000,000,000,000,000,000,000 but first give a $99,999,999,999,999,999,999,999,999,999,999,999,999.99 coupon, effectively selling it for $.01. The state would be forced to try and collect more money than ever existed or will exist from every person. The point is that there is no real more value to a coupon than to a customer negotiating a lower price, which is never taxed.