Jewelers of America and the Connecticut Jewelers Association are marshaling their troops to fight a proposal by Gov. Dannel P. Malloy to raise taxes on jewelry purchases in his 2012–13 budget.
The governor proposed a 3 percent tax on jewelry priced higher than $5,000. Because Connecticut already has a general sales-tax rate of 6 percent (which, under the proposed budget, would rise to 6.35 percent for retailers), this would mean that jewelry over $5,000 would be taxed at a rate of more than 9 percent. The luxury tax also applies to automobiles (over $50,000), boats (over $100,000), and clothing (over $1,000).
Such levies “just don’t work,” says Jewelers of America chief operating officer Robert Headley. “The government may be trying to raise revenue, that is fair,” he says. “What is not fair is that this tax will end up hurting our members. Consumers will end up not buying jewelry over $5,000, or buying it at a neighboring state where there is no luxury tax. We have tried luxury taxes, and they simply do not raise revenue.”
Richard Michaels, a partner with Waterbury, Conn.–based Michaels Jewelers, says the $5,000 threshold is unreasonable. “$5,000 is a fairly common sale. Imagine telling a 25-year-old looking for an engagement ring that it’s a luxury.”
Michaels figures that if the tax is enacted, he will probably absorb it himself. But he predicts it will prove self-defeating. “We’re already fighting against the Internet,” he says. “This will just make people buy online, and then the state will collect zero taxes.”
If passed by both chambers, Connecticut’s budget will go into effect July 1, 2011. Headley says jewelers can contact their legislators through JA’s Legislative Action Center (capwiz.com/jewelers).