Municipalities refuse to continue property tax breaks initiated last year during pandemic
After Governor Ned Lamont ordered municipalities to waive penalties and ease taxpayer deadlines last year at the height of the pandemic, lawmakers gave communities the option of continuing some breaks this year.
But after decades of depending on property tax revenues for fiscal survival, cities and towns aren’t warming to the thought of losing any income they don’t have to give up.
“We wanted to avoid this kind of situation,” said Betsy Gara, executive director of the Connecticut Council of Small Towns, which represents 110 communities with fewer than 30,000 residents. “Anything that compromises the ability to collect these property taxes is going to be a problem. “
“All of this contributes to the state’s absurd over-reliance on property taxes,” said Joe DeLong, executive director of the Connecticut Conference of Municipalities, the main lobby group for the 169 towns and cities of the State. “It’s a lot to ask a municipality to give property tax relief, or some kind of incentive, when that’s mainly its only source of income. “
The property tax is by far the most important tax or charge collected by municipalities.
The JCC estimates that municipalities collect about $ 20 billion a year in property taxes, about double what Connecticut income tax – the state’s biggest revenue driver by a large margin – generates. every year.
But unlike income tax, property tax is regressive, meaning homeowners are charged the same rate regardless of their income or wealth.
Many supporters of tax reform have long argued that the Connecticut system traps many low-income households in poverty, while high property tax rates have a chilling effect on business growth and economic development in general. in urban centers.
Lamont took action last spring when the coronavirus shut down many businesses and left up to 292,000 filers receiving weekly unemployment benefits to ease national and local tax burdens.
The governor extended the income tax filing deadline from mid-April to July 15.
And he ordered municipalities to offer at least one of two forms of relief for property taxpayers: either add 90 days to the deadline for paying property tax bills for July 2020, or reduce the late payment penalty. from 18% to 3%. All communities complied and some offered both forms of relief.
This year, the General Assembly passed and Lamont enacted a bill that empowered local legislative bodies to offer the same two options to provide relief in fiscal years 2021-2022 and 2022-23, but mandated nothing.
DeLong and Gara both said they were not aware of any participating municipalities. And neither the CCM, nor the COST, nor the Lamont budget office monitor participation; another sign that the program is not adopted.
The Legislature Planning and Development Committee raised the optional relief measure and Representative Cristin McCarthy-Vahey, who co-chairs the panel, said the lack of participation was not too surprising.
“Sometimes with things like this it can be difficult to choose an option,” she said, noting that economic uncertainty worries many city and state officials.
Even though Connecticut’s economy has recovered more than half of the jobs lost in the first months of the pandemic, the Department of Labor says 120,000 tax filers are still receiving weekly benefits.
And the Federal Temporary Assistance for the Unemployed, which increased typical unemployment benefits in Connecticut from $ 300 to $ 600 per week, expired on September 4.
Municipalities have received more than $ 1.5 billion in direct federal assistance through the American Rescue Plan Act to help them this fiscal year and the next.
And state lawmakers expanded municipal aid in the new biennial budget they approved with Lamont in June. This plan increases a major non-educational grant program by approximately $ 240 million in this and next fiscal year, while increasing education grants by approximately $ 70 million per year on average.
But city officials say the aid, while appreciated, was not enough to reverse a trend that has continued for decades, a pattern of increasing burdens on towns and villages as retirement debt long ignored. began to consume more and more of the state operating budget.
DeLong said many communities are using additional federal and state aid simply to cover shortfalls in their local budgets, avoid property tax hikes and reverse previous cuts to basic services.
City leaders said the pandemic had taken a heavy toll on towns and villages.
CCM predicted in June 2020 that in the first three months of the coronavirus, municipalities had lost about $ 400 million in tax revenue related to either overdue payments or deferred payments. And while a large chunk of that money was eventually received, the first few months of the pandemic also added about $ 63 million in emergency costs to cities.