In their haste to enact some kind of significant legislation before the end of 2017, Republicans passed a tax reform bill that has left some scratching their heads.
It’s probably safe to say that when people start rushing to town hall to prepay their tax bills that something has not been thought out carefully enough, but that is what has been happening.
Connecticut, with its high property taxes, is among the states hit hard by the legislation, which caps the mortgage interest deduction at $500,000 and property tax deduction at $10,000.
“Considering that 41 percent of Connecticut residents itemize and take this deduction, our state will be unfairly penalized,” observed Democratic U.S. Rep. John Larson, whose district includes Southington and Berlin.
There are estimates that under the new tax law that 41 percent will be reduced to from 5 percent to 8 percent, obviously a significant reduction
For the vast majority of taxpayers it means there will no longer be much difference, at least when it comes to taxes, between owning a home and renting one.
“The mortgage interest and property tax deduction got first-time home buyers off the fence,” said Michael Barbaro, president of the Connecticut Realtors Association. “They’ll now be able to get a similar benefit by renting.”
Moody’s analytics expects Fairfield, Hartford and New Haven counties to be among the nation’s housing markets that will see a drop in housing values.
Republicans expect their legislation, which grants tax breaks to corporations and the wealthy, to have a trickle down effect, creating jobs and boosting the economy.
In places like Connecticut, where housing values could drop along with incentives for home buying, a different type of trickle down could take place.
Many industries, like landscaping, renovation and other services, rely on a vibrant home ownership market and could be hurt by a downswing.
Perhaps it’s worth hoping for the best, which would be tax reform that boosts the economy and employment, adding positives that offset the negatives.
But it’s going to be a challenge for a state already struggling with fiscal woes. How Connecticut responds is a question for the new year.