Time To Retire The

2003 Conveyance Tax Increase

Dozens of Newtown realtors boarded a bus Wednesday morning for a day of politicking in Hartford. They were once again taking up a battle they have waged every year since the conveyance tax rate on real estate sales was increased in 2003. That was during the Rowland administration when an economic slump sparked a state budget crisis that resulted in significant cuts in state aid to towns and cities. As a sop to the aggrieved municipalities, the state allowed them to raise revenues through an increase in the real estate conveyance tax. The tax increase was originally scheduled to expire the following year, but the Connecticut Conference of Municipalities successfully lobbied for an extension of the tax, and then another, and another. The current extension of the extension’s extension is slated to expire at the end of June, and the realtors went to the capitol this week to remind legislators of their original promise that the tax would be temporary.

There are many reasons why the conveyance tax has gained so much favor among towns and cities and their legislative representatives in Hartford. In a time when municipalities have been begging the state for property tax relief, the real estate conveyance tax is the only alternative source of direct tax revenue to local budgetmakers. Local revenues from that conveyance tax have slowed this year as a result of the gut wrenching slowdown in the housing market. This may be the perfect time to wean Connecticut’s towns and cities from a tax that falls exclusively on the already hard-pressed sellers in the real estate market.

Since the tax was increased in 2003, Connecticut realtors have complained that the additional levy has adversely affected the real estate market. There is little evidence of that, since the tax is paid by sellers not buyers, and few people are willing to hang on to homes they want to sell just to avoid the tax. But with the value of existing homes in the current market shrinking month by month as they do not sell, the sting of any extra tax is sharper, especially for the elderly fixed income who are selling single-family homes they can no longer maintain. This would be a good time for state lawmakers to start keeping the promises they make. If we are ever to take them at their word, their words have to mean something. “Temporary” plus three extensions should not equal “permanent.”

Finally letting the 2003 real estate conveyance tax increases expire at the end of June will cost Newtown an estimated $324,087. If state lawmakers are serious about property tax reform, they can start by paying for more of the drastically underfunded special education services they have ordered towns and cities to provide. Hartford has left it up to municipalities to pay for more than 60 percent of these mandated costs. Next year, Newtown taxpayers will foot the bill for $586,000 in state mandated out-of-district special education tuition costs alone. Let real property tax relief start there.