Proposal Would Direct CT Meals Tax Money To Municipalities, Cut Energy Costs

by Karla Ciaglo Bluesky CTNewsJunkie

HARTFORD, CT — Connecticut municipalities could soon receive a direct cut of the state’s restaurant meals tax under legislation advancing in the General Assembly, a shift supporters say would correct a longstanding imbalance between where tourism dollars are generated and where they end up.

Senate Bill 2, co-sponsored by Senate President Pro Tem Martin Looney and Majority Leader Bob Duff along with 21 other Senate Democrats, would split the existing 1% surcharge on restaurant meals equally between the state’s Tourism Fund and a newly created “municipal diversification account.” Beginning Oct. 1, 2026, towns would receive quarterly distributions based on where the revenue was collected.

The meals surcharge — imposed on top of Connecticut’s base 6.35% sales tax — currently flows entirely to the state. Under the bill, the Department of Revenue Services would track collections by municipality and distribute the local share quarterly. Revenue that cannot be attributed to a specific point of sale would be distributed proportionally among towns that reported meal sales that quarter.

The bill also would expand an existing sales tax exemption on electricity to cover commercial and industrial businesses with gross income under $10 million annually — a provision backers say would cut qualifying businesses’ electric bills by 6.35% immediately. Connecticut has among the highest commercial electricity rates in the country.

Municipal officials argue the current system creates a disincentive for towns to attract large events. Joan Lohm, executive director of the Connecticut Conference of Municipalities, pointed to Hartford’s experience hosting NCAA tournament games: visitors filled hotels, bought gas, and dined downtown, generating tax revenue that went entirely to the state while the city absorbed police overtime and public works costs.

“At the end of that, the city just got a bill,” Lohm said, noting that this created a culture where municipalities were hesitant to host events. 

Restaurant operators said the meals surcharge already functions as a locally generated revenue stream that the state captures and would be better spent if it was redirected to reinvestments

“Every guest who walks into a restaurant pays a 1% meal tax, and that money disappears into the state bucket,” said Aubrey Lamonica, who owns three restaurants in Middletown and Essex.

West Hartford Mayor Shari Cantor called the bill an “amplifier” for money already circulating in local economies. Old Saybrook First Selectman Carl Fortuna estimated his town would receive roughly $300,000 annually — about half of a typical year’s budget increase — enough to fund both marketing and streetscape improvements on its main street.

Hotel Marcel developer Bruce Becker said his New Haven property contributes more than $1.6 million annually in occupancy and other taxes to the state. He said individual properties cannot effectively market the state on their own and that pooling meals tax revenue for tourism promotion is the more efficient approach.

At a Finance, Revenue and Bonding Committee public hearing Friday, arts organizations also lined up behind the bill, citing a downstream benefit of the Tourism Fund allocation: a portion of those dollars flows to the Connecticut Office of the Arts.

Amanda Roy, chief executive officer of the Greater Hartford Arts Council — which serves 34 cities and towns in the capital region — told the committee that state arts investment is catalytic, allowing organizations to leverage private philanthropy and corporate support on top of public dollars. She said the stability matters especially now, with federal agencies including the National Endowment for the Arts, the National Endowment for the Humanities, and the Institute of Museum and Library Services facing uncertainty under the Trump administration.

“At a time of federal instability, dedicated state funding provides essential stability for our sector,” Roy testified.

Lew Wallace, board president of the Cultural Alliance of Western Connecticut, which serves ten municipalities in the Danbury region, echoed the argument. His organization receives roughly a third of its annual funding from the arts office and uses it to leverage grants, member dues, and private support for projects including a mural at the Danbury Fair Mall and a youth arts program.

“Arts, humanities and cultural organizations will never leave the state,” Wallace testified. “Increasing funding to these sectors is an investment that remains in Connecticut.”

The bill also creates a Connecticut-India Trade Commission within the Legislative Department to advance bilateral trade and investment. Members would be appointed by legislative leaders of both parties and the governor; an initial report would be due February 1, 2028.

No opponents testified at Friday’s hearing. The Finance, Revenue and Bonding Committee has not yet scheduled a vote.