Connecticut's Ongoing Failure to Address Property Tax Dependence
Limiting property tax dependence requires more state funding to local governments, which means raising more state revenue from other taxes, but this is necessary to make Connecticut the prosperous, just, and integrated state that it can and must be.
August 22, 2019 at 03:05 PM
3 minute read
Property tax dependence is killing our state, but we keep failing to fix it. Connecticut has the third-highest property taxes in the country; we are fifth in property taxes as a percentage of state revenue. Property tax dependence is even more extreme for our cities and towns. In Connecticut, 60 percent of local revenue comes from property taxes, compared with 30 percent across the nation. Unlike other property tax-dependent states such as New Hampshire and Massachusetts, we do little to equalize revenue between property rich and poor municipalities. This exacerbates inequality, undermines efforts at regionalization, and kills economic development in our struggling cities. Yet another legislative session has come and gone without any effort to address property tax dependence.
Property tax dependence undermines the health of our struggling cities. Plagued by low-value real estate, cities must raise property taxes higher than surrounding towns. The annual cost of these taxes is capitalized into sales prices, driving property value even lower. This hits both residents and businesses hard. In Hartford, for example, commercial property taxes are double residential rates, driving businesses away from the city. Making matters worse, in cities such as Hartford, New Haven, and Bridgeport, much of the land base is occupied by government and nonprofit entities that don't pay property taxes. Although the state makes payments in lieu of taxes (PILOTs) on state property, PILOTs are inadequate and inconsistent.
Property tax dependence also continues wasteful divided governance between our 169 cities and towns. With most revenue coming from property taxes, cities and towns have little incentive to regionalize services. If you're raising the money yourself without much help from the state, why share services with your neighbor? Even worse, why not zone out higher-density affordable housing and limit the number of residents receiving those services?
Also, with funding for services—particularly schools—dependent on local real estate wealth, inequality between municipalities runs rampant. Connecticut has one of the highest rates of income inequality in the country. It has the greatest educational achievement gap between rich and poor students. It also has some of the most serious residential segregation. There are many causes for these disparities, but municipal reliance on property taxes is at least one of them.
Although former Gov. Dannel Malloy promised to address property tax dependence, little changed under his administration, and Gov. Ned Lamont has not even tried. The Legislature did not address the problem during its most recent session either, though at least it did not exacerbate the issue by increasing state credits for local property taxes.
There are no easy solutions. Limiting property tax dependence requires more state funding to local governments, which means raising more state revenue from other taxes, and likely claiming a portion of local tax revenues for redistribution. But while the solutions aren't easy, they are necessary to make Connecticut the prosperous, just, and integrated state that it can and must be.
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