The governor’s budget proposal puts inordinate pressure on cities and towns and ultimately leaves the state worse off in terms of overall tax policy.
Wallingford, for example, faces a net $10.1 million reduction in state revenue, making it one of the hardest hit cities and towns under the proposal. By way of explanation, the governor’s budget director said last month that the level of sacrifice cities and towns were being asked to make in light of the state deficit was determined in part by an ability to pay.
That could refer to a relatively low mill rate in Wallingford and healthy budget reserves — though it most assuredly does not take into account other factors such as median household income. The average Wallingford homeowner is hardly in a better position to absorb steep property tax increases than residents of most other municipalities. And the huge reduction in state aid is unlikely to factor in the loss of the town’s top taxpayer, Bristol-Myers Squibb, or the related stagnancy in the Grand List, or the expense of a multi-million-dollar legal battle associated with the town’s municipal electric division.
In general, shifting $400 million in education costs to municipalities, to be funded mainly through higher local property taxes, makes state tax policy as a whole that much more regressive, which is bad for Connecticut in the long run. The budget does this even “in the face of acknowledging our regressive tax structure,” as state Rep. Josh Elliott, D-Hamden, observed while questioning the state budget director at a public hearing last week.
A shift toward greater reliance on property taxes to fund government operations is a step backwards because home values for many residents often don’t correlate with income.
“It is common for a middle-income family to own a home valued at two or three times their annual income while wealthier taxpayers are less likely to own homes worth as much relative to their income levels,” explains a report by the non-partisan Institute on Taxation and Economic Policy. “Moreover, property taxes are not responsive to variations in taxpayers’ income: someone who suddenly loses his job will find that his property tax bill is generally unchanged, even though his ability to pay it has drastically fallen. ...A similar problem is very common among elderly taxpayers at the end of their working careers who find themselves ‘property rich’ but ‘cash poor.’”
To address this in part the governor is giving cities and towns the ability to tax hospitals, which seems less a well-considered policy solution and more a reflection of his continued annoyance at that particular sector.
Wallingford may have no choice but to tax its hospitals, but the option does little to help a community like Southington, which has struggled to keep the small hospital it has.
“We’ve worked too hard over the past two years to retain the hospital,” Town Manager Garry Brumback said last week, referring to the Bradley Memorial campus of the Hospital of Central Connecticut.
There have to be some better ideas floating around the General Assembly.
Reach Managing Editor Eric Cotton at (203) 317-2344 or email@example.com. Follow him on Twitter @ecotton3.