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Lifting Property Tax Burden

April 17, 2007

With the clock ticking on the 2007 legislative session, it's not too late to find common ground on needed property tax relief. Gov. M. Jodi Rell's proposal was a lot of days late and a lot of dollars short, but at least it ended the nonsense of all those years when she and former Gov. John G. Rowland routinely dismissed the idea that the state has anything to do with property taxes. Now, it would be a real mistake to lose this opportunity.

By any measure, Connecticut has one of the worst property tax burdens in the nation, routinely much higher than national average. With a state income tax that hits lower- and middle-income wage earners the hardest, over-reliance on property taxes adds immensely to the overall unfairness of tax burdens in our state. Property taxes perversely undercut "smart growth," drive expensive sprawl and foment no-win competition for development among cities and towns.

The problem, of course, is that the governor's proposal doesn't really solve the property tax problem. Instead, her plan takes away the power of local officials to control municipal spending in a way that the state government officials would never accept for themselves. After all, this is the same governor who has effectively declared the state's spending cap dead in the water while proposing a mandatory cap for cities and towns. Her proposal only worsens disparities across the state because it would have practically no effect on very high property wealth, very low property tax communities.

Worst of all, Gov. Rell's plan to cap municipal property taxes, absent state funding sufficient to make up the difference, assures the slow but certain fiscal strangulation of public schools and other basic public services. The fiscal highway in Connecticut is already littered with the remains of state government's past broken promises. State government is hardly in a position to tell local government, "Trust me, the check is in the mail."

Even if the governor has fumbled a bit, the General Assembly, Democrats and Republicans alike, can still pick up the property tax relief ball and run with it. So what would be a fairer and more reliable plan? Start by scrapping the governor's earlier proposal to shift "car tax" burdens to residential and commercial property. Instead of Gov. Rell's plan to wipe out existing middle-income property tax relief, increase the state's property tax credit to $1,000 and adopt a modest state earned-income tax credit so there is tax relief for those who do not pay state income tax. Legislative Democrats have already wisely added these ideas to the mix.

Then, adopt a reasonable cap on the annual growth of property taxes, as Gov. Rell proposes, but apply that cap only to discretionary local spending. In other words, exclude increased costs of unfunded state, federal and court-mandates from the local budget base for tax rate cap purposes. Do not, as Gov. Rell proposes, exclude debt service because it's a license to borrow and spend just like state government's already highest-in-the-nation indebtedness. Set a lower tax increase cap for very high wealth, very low tax rate cities and towns so statewide disparities do not worsen. Also, annually adjust the cap for increases or decreases in a statewide Municipal Cost Index and be sure the cap is adjusted to reflect implementation of state-mandated revaluation.

Any property tax cap must allow for more taxation during true fiscal emergencies. Otherwise, the cap should only be overridden by a two-thirds vote of the local budget authority or a majority of voters, but not both. Most important of all, in our land of unsteady state fiscal habits, exempt cities and towns from the cap to the extent that promised state aid fails to come through. The accountability really ought to run both ways. One immediate sign of goodwill would be fully funding state payments in lieu of taxes on tax-exempt property, increasing the state's foundation level of support for public schools and adopting a fairer state income tax to pay for it.

The state should also go back to holding property revaluations every 10 years to capture more of the averaging out of property values over time. Finally, it's time to align state and local budget adoption schedules so that state aid can be reliably anticipated.

Maybe, just maybe, this could be the year for significant action on property tax reform.

Kevin Sullivan is the former lieutenant governor, a longtime leader in the state Senate and a past mayor of West Hartford.

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
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