Commentary –

‘Property Tax Reform’: Always More Of The Same

By Chris Powell

Former state Comptroller Bill Curry and state Senate Majority Leader George Jepsen, contending for next year’s Democratic nomination for governor, say property tax reform will be a big issue for them. Property tax reform has been a common phrase in Connecticut politics for years now, and Curry and Jepsen are for it. But exactly what is it?

Of course it is understood as a reduction in property taxes. But most increases in state financial aid to municipalities in the last 30 years have been presented in part as property tax reform, and there’s little property tax reduction to show for them, even as state spending has exploded, almost doubling in the last 10 years alone.

According to the Connecticut Policy and Economic Council, municipal property taxes in the state have increased by an average of 15 percent over the last five years, approximately the inflation rate. Property taxes appear to have been reduced or restrained only in a few cities that receive hugely disproportionate state aid per capita – particularly Hartford, where taxes have been cut 13 percent; New Haven, where taxes have been cut 4 percent; and Bridgeport, where taxes have been cut by a half percent. A fourth city, New Britain, has held taxes to a 2 percent increase in the last five years.

Of course taxpayers in those cities may be grateful to have done so much better than the state average. But even with this restraint on property taxes, Hartford, Bridgeport, New Britain, and New Haven remain the four highest-taxed municipalities in the state. Their living conditions are deteriorating and their populations are declining, and their inner suburbs are becoming more stressed by the influx of poor people who are fleeing the cities as they aspire to join the middle class.

The state income tax also was presented as property tax reform when it was enacted in 1991, but it only underwrote the system of state spending that was already in place and was running deeply in deficit. As much as the income tax increased progressivity in taxation – shifted some of the tax burden toward wealth – it averted imposing greater progressivity in spending, averted a serious questioning of priorities in spending. Indeed, avoiding a reconsideration of spending, and not progressivity in taxation, seems to have been the income tax’s primary purpose. It mainly cemented the political status quo, which is why, despite the mythology that has grown up around it, that enacting it took heroic courage, it was actually the path of least resistance.

Thus the sort of property tax reform Connecticut has been given over the last 30 years or so seems to have been mainly a matter of giving municipal employees a key to the state treasury, such tax reform having coincided with legislation imposing binding arbitration on municipal public employee union contracts and with the growth in the political influence of public employee unions.

This can be defended as good policy, in a way. Certainly Connecticut’s property taxes remain high by national standards even with this much “reform,” and without it they probably would be higher still.

But if the public had been told that the main purpose of “property tax reform” was to move from municipal budgets to the state budget the cost of municipal employee wage and benefit increases, there would have been much less enthusiasm for it.

What else might constitute “property tax reform”?

From a taxpayer’s point of view the best property tax reform might be repeal of binding arbitration and the return to ordinary democratic control over public employee compensation, which constitutes the great majority of municipal spending.

Failing that, there might be support for devices like a homestead exemption to the property tax, exempting from taxation the first, say, $25,000 of value of a home.

Big-thinking egalitarians might go a lot further and suggest that the state levy its own property tax at a single rate statewide and distribute the revenue to municipalities according to a need-based formula, or take overall municipal school funding, leaving cities and towns to impose their own property tax only for public works, police, and lesser functions.

But whether “property tax reform” is incremental or sweeping, it has two inconvenient inevitabilities.

First, the more municipal finance is shifted to the state, the less local control there will be. While property taxes are burdensome in all but the wealthiest towns, they still convey a measure of local choice and freedom.

And second, and more compelling politically, “property tax reform” is by definition only a way of making Person A pay more so that Person B can pay less. Person A may oppose this.

Maybe Connecticut’s tax system could use more progressivity. And yet for all the supposed progressivity brought to Connecticut’s tax system through increased state aid to cities and towns and the state income tax, many ordinary middle- and working-class towns have gotten socked hard with property tax increases in the last five years, according to the CPEC.

For example, Stafford has suffered a 45 percent tax increase; Groton and Windsor Locks, 30 percent; and Plainville, Thomaston, and Torrington, 25 percent. The list of far-from-wealthy towns that lately have had property tax increases far higher than the state average is long.

Who will clearly define the wealth to be taxed more in the name of more property tax reform? Who will clearly identify the recipients of the money to be redistributed? And who will show that it all will not be just more of the same?

For “property tax reform” isn’t just a warm and fuzzy slogan. It has meant and will continue to mean winners and losers, and so far most of the winners seem to be on the public payroll.

(Chris Powell is managing editor of the Journal Inquirer in Manchester.)