Opinion: Fundamental reform of property taxation: If not now, when?

Ideas for cutting Connecticut’s rising budget surplus are flowing faster than the waters of the Long Island Sound after a Northeast: Lower the sales tax. Abolish pension income tax. Increase the property tax credit. Reimburse the retirement pension debt of state employees and teachers. Cancel the restaurant food surcharge. Strengthen the unemployment insurance fund. Modify the property tax on vehicles. Increase the earned income tax credit.

The outpouring of proposals is dizzying but not surprising. This is an election year, when the offices of the governor and all 187 state legislators will be on the ballot. And what better way to entice voters to fill in the circle next to their name than to put some quick cash in their pockets.

As such, a tax cut (or cuts) of some sort is a virtual certainty, made possible by the projected $1.48 billion surplus, the compliments of federal Covid aid, a booming stock market in 2021 and lower-than-expected government spending.

While proponents of the ideas mentioned above undoubtedly believe they have merit, the one tax proposal that would do more to restore Connecticut’s economic hegemony is unfair, regressive, inefficient and costly to the state. It accounts for a disproportionate 42% of all state and local taxes. As a percentage of state and local revenue, Connecticut property tax revenue is the third highest in the country at 25.4%, significantly higher than the national average of 16.6%.

Among the potpourri of state levies, the property tax is the one that discourages business expansion and job growth; gobbles up open space by encouraging reckless land use and the proliferation of warehouses (Connecticut’s newest engine of growth); destroys cities; creates disparate educational opportunities; and hastened the exodus of residents to low-income or low-income states.

The property tax burden must be reduced, which can only be done if the state’s tax structure is overhauled. Now is not the time for half-baked measures, gimmicks, or patchwork patches. Now is the time for fundamental reform and a rebalancing of the state’s fiscal structure, given that the state has plenty of money and can dare to think big and act boldly.

To that end, the Property Tax Task Force, a project of 1000 Friends of Connecticut, has prepared a factual report, “Connecticut Property Taxes: Possibility of Change” (www.taxpolicyct.org) which lays out deep-rooted problems with the current tax structure and provides a hearty menu of solutions.

Skeptics will ask: where will the money come from if Connecticut rebalances its tax structure and reduces the property tax burden? As legitimate as this question may seem, it is misleading to suggest that there are no realistic solutions. One, which has been suggested time and time again by a litany of proponents, is to raise the income tax rate for the very wealthy. Regrettably, Governor Ned Lamont recklessly resisted this course of action.

But there are alternatives, including the dozens of tax breaks for special interest groups that have proven counterproductive. For example, The CT Mirror recently reported that over the past decade, “the average economic impact of the Film and Digital Media Production Tax Credit amounted to a loss of $58,510,604 in net revenue per year, well over half a billion dollars in total.” This information comes from the State Department of Economic and Community Development’s 2019 Annual Report.

Curiously, the DECD recommends continuing the tax credit program despite the losses. But Connecticut can no longer pander to special interests while ignoring the plight of its people, especially those struggling to keep their heads above water. The data is irrefutable. Property taxes particularly hurt those at the bottom of the income scale.

Households in the lowest income bracket, which make up about half of all households in the state, pay 12.52% of their income in property taxes, while households in the upper income bracket pay a rate of effective property tax of 4.03% or less. Looked at another way, 90% of households in the state pay, on average, property tax rates two to seven times higher than the top 10% of households.

These statistics point to two inherent flaws in the property tax system: owners of property of similar value are taxed at different rates depending on where they live, and low- and middle-income households pay significantly more than their high-income counterparts.

To begin fixing the state’s ill-conceived tax structure, 1000 Friends recommended three steps the state can take immediately:

• Fully fund the program that reimburses cities and towns for non-taxable property (called PILOT or Payments in Lieu of Taxes);
• contributing more to help with the cost of special education which is blowing up the municipal budget; and
• Provide low-income households – including renters, who pay more as a percentage of their income for housing than owners – a refundable property tax credit.

These are not fanciful ideas, but realistic proposals that would begin to address the unfairness, inefficiency, and regressivity inherent in the state tax structure.

If policymakers fail to correct these inherent flaws, the state will continue down a path littered with stricken cities, educational inequality, job losses, fleeing retirees, and growing poverty. warehouses.

Be bold, Connecticut.

Michele Jacklin is a member of the Property Tax Task Force of 1000 Connecticut Friends.

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