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Thursday, January 18, 2007

Get rid of the property tax?

Lets look at another tale of a proposal that doesn't have a chance in becoming a reality (and the super-duper minority Republicans at the Capitol know this).

This latest idea being proposed by State Senator David Cappiello has so many holes in it that I'm surprised that it's getting any attention from the media.

I'll let one of my favorite reporters in the state, Ted Mann of the New London Day, break it all down.
Republicans in the state Senate have a solution to the perennial legislative question of how to decrease the burden of the municipal property tax: Let municipalities scrap it altogether.

The proposal, announced Wednesday by Sen. David Cappiello of Danbury, the highest-ranking Republican on the Appropriations Committee, would allow cities and towns to implement new local taxes of their own design - on income, product sales, hotel rentals or other sources - in exchange for repealing their local property taxes.
You read this right folks. The Republicans are offering towns and cities to create new tax laws to collect revenue in exchange for scraping property taxes altogether. Well, maybe if you're a senator from an area like Danbury, you can try to peddle something like this due to the amount of commercial development in the area BUT if your from a small town and you lose the revenue from property taxes, you're basically screwed.

Cappiello knows this so what's the deal?
It's a provocative notion, Cappiello conceded in a telephone interview Wednesday from his office at the Capitol, one intended to stimulate debate on the state's tax system, if not necessarily to become law in the form he and his fellow Senate Republicans propose.

"It's a relatively simple concept, but I want to emphasize that it's really a concept," Cappiello said.
Even Stevie Wonder can see that this is JUST A CONCEPT and far from something to even be taken seriously simply because of the HUGE amount of problems axing the property tax would cause on smaller towns.

Again, Cappiello admits the obvious...
Danbury would likely consider such a move, Cappiello said, due to its substantial retail base and a surfeit of hotels — the better to generate municipal revenue with a local sales tax or levy on hotel fees.

But he conceded that other municipalities, those for whom taxing residents' income or spending would be distasteful or potentially harmful, would likely pass on the idea.

Word of the proposal, which has yet to be raised in the legislature's Planning and Development Committee, was greeted with guarded skepticism in the city government of New London, which has struggled for years with a limited amount of taxable property with which to fund its basic services.

Declining to comment in the abstract on a proposal he hadn't seen, City Manager Martin Berliner nonetheless said he believed allowing individual jurisdictions to write their own tax laws could lead to unintended consequences and a "mish-mash" of confusing or contradictory tax law.
Just what people need...more confusing tax laws. I thought Republicans wanted to get rid of taxes, not create new taxes.

Fox 61 did a great report last night detailed the various problems with the proposal Cappiello's offered yesterday.

Look, you just can't get rid of property taxes...period. Offering stuff like getting rid of the property tax might sound great but ultimately is totally unrealistic because of the enormous problems it would create for small towns and cities that rely on the revenue.

Think about it.

If a Republican mayor like Boughton sounded alarm bells over a Republican governor's proposal to eliminate the car tax, imagine the outcry if property taxes were wiped out.

You do the math.

Since cities and towns reply so much on property taxes to survive, at the very least, if you're someone who has a "plan," goes through the trouble to call a presser, look straight into the camera, and give the public your "plan" to wipe away something as critical as property taxes, you better have a serious plan make up for the loss in revenue, which is clearly non-existent in Cappiello's proposal.

Which brings me to this quote from Mayor Boughton in today's News-Times regarding Cappiello's proposal to eliminate the property tax.
"I think anything we can do to provide more flexibility to cities and towns would definitely be welcomed. This is a serious proposal and it warrants serious consideration," Boughton said.
Hmm...now lets go back in time and take a look at just a few of the problems Mayor Boughton and Newtown's Herb Rosenthal had with Governor Rell's proposal to scrap the car tax.

Now remember, these are just a few problems presented by the elimination of the car tax.
Property tax relief is critical, and Governor Rell deserves praise for putting it at the top of this year's legislative agenda.

In making her groundbreaking proposal to eliminate the car tax, the governor has gone where others have feared to tread.

The problem of Connecticut's motor vehicle property tax has long been a vexing one for both state and municipal officials.

But the governor's proposal as drafted needs a major tuneup in order to ensure that it provides the intended relief to property taxpayers and does not undermine local government finances in the short term and long term.


And while the governor's proposal did not make it out of the General Assembly's Finance Committee, it is expected to resurface during upcoming state budget negotiations.

As the 2003 Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives said: "... this particular property tax is viewed as especially unfair because residents in different communities pay vastly different taxes on the same property. This system encourages some Connecticut residents to register motor vehicles in other lower-tax municipalities or even out-of-state, causing significant local revenue losses and administrative difficulties."

The governor's proposal would eliminate, as of July 1, property taxes on most passenger cars and motorcycles; create a new $500 million "grant" called the Casino Assistance Revenue Grant (CAR), which is intended to reimburse each town for the municipal revenue lost as a result of the elimination of the car tax; and eliminate the $400 property tax credit on the state personal income tax to help pay for the elimination of the car tax.

According to the governor, the program would pay each municipality a grant equal to or greater than the amount it would lose in revenue in fiscal year 2006-07.

This is because, the governor says, towns and cities would be reimbursed for 100 percent of the property tax owed on all eligible vehicles, even if a municipality's tax collection rate is less than 100 percent.

But there are major problems with the governor's proposal as embodied in Senate Bill 50. These problems need to be corrected if the governor's proposal is to fulfill its promise to property taxpayers and their hometowns.

[...]


The bill should be changed so that the proposed payment schedule for municipal reimbursements avoids negative cash-flow impacts on towns and cities.

The proposal raises concerns among local officials that future reimbursements would disappear.

The state's track record on this front is dismal. There are numerous examples of things being taken off the property tax rolls, only to have promised state reimbursements shrink or disappear completely.


[...]

The proposal eliminates the property tax credit on the state personal income tax, thereby negating existing relief to residential property taxpayers.

This would not be a proper tradeoff. One form of tax relief should not be sacrificed for another.


The governor's proposal should be changed so that the property tax credit on the state personal income tax is retained and increased to at least $400, as existing statute provides.

If these concerns are addressed in a modified car-tax proposal, then this initiative will be truly revenue neutral to towns and cities and will provide the promised property tax relief.

The irony is that unless municipal aid is significantly increased, as called for by the General Assembly's Appropriations and Finance committees, and the car tax proposal is significantly modified, the result will be statewide property tax hikes and local service cutbacks.

The governor's proposal to eliminate the car tax needs a major tuneup - before it moves down the legislative highway.
Now, if the mayor had so many concerns with Governor Rell's elimination of the car tax (and rightfully so), imagine the amount of problems there would be if the property tax was axed (which he didn't mention when interviewed by the News-Times).

The problem with these types of pie-in-the-sky ideas is simple. If your going to offer a radical proposal, at least have confidence in what your offering to the public or people will be left with the impression that you're just grandstanding for the media.

UPDATE: CTNewsJunkie has more:
The 2003 Blue Ribbon Commission Report on Tax Reform concluded, "One of the methods to reduce over reliance on the property tax is to enable municipalities to generate revenue from other means."

But it felt the best way to get there was through regional cooperatives. The report concluded, "The commission believes that local-option taxes on a municipality-by-municipality basis in a small state like Connecticut are generally counterproductive--they tend to foster tax competition between communities and make high-tax towns that opt for additional taxes less competitive."

[...]

Heidi Green, president of 1,000 Friends of Connecticut, a group that advocates for smart growth said she applauds the Republicans for starting the conversation, but worries about the land use issues it may create. She said towns that rely on a local income tax may want to attract higher income people by building big houses and towns that rely on the sales tax will try to entice lots of retail business.
This is just a tip of the iceberg when it comes to something as radical as what Cappiello is proposing. Politicians are always offering proposals which ultimately get killed (e.g. Rell's car tax). It's one thing to offer something...it's another thing to offer something that is somewhat realistic.