OP-ED | Property Tax Armageddon Comes for Connecticut
Posted to: Analysis, Congress, Consumer Protection, Town News, Housing, Opinion, Taxes, White House, Real Estate
Rejoice, it’s tax week! Unfortunately if you live in Connecticut or another state that’s heavily dependent on property taxes you might find yourself socked with a much, much larger bill next year — or even this year. Just another benefit of living here in the Happiest Place on Earth.
An article in The Atlantic’s CityLab sums it up: once again, we’re screwed. The culprit this time around is the new tax law passed by Congress in late 2017: specifically, the cap on deductions for state and local taxes. “In states with high local and state taxes … the new dispensation could lead to stagnant property values,” writes CityLab’s Kriston Capps. “That, in turn, affects property tax receipts. And Connecticut relies on property taxes like almost no other state.”
Hoo boy, is that ever true. We’re a state of 169 fractious, pea-sized municipalities, each of which is almost completely reliant on property taxes to fund their governments. Any other monies towns bring in comes from the state or from fees, not taxes.
This could have several effects, all of them horrible. Homeowners with more expensive properties could be hit with much, much larger tax bills than they’d seen before because they wouldn’t be able to deduct all of their state and local taxes. The new tax law caps deductions for state and local taxes at $10,000 — so if you owe more than this in property taxes, you’ll feel it.
For those trying to pre-pay next year’s taxes, the changes are already hitting hard. A colleague from West Hartford found herself bumped up a tax bracket, but because of the deduction cap she was hit with an unexpected $13,000 tax bill. She’s talking about selling her house and moving, and she isn’t the only one.
If property taxes are going to be an albatross after a certain level of wealth, people may decide they don’t need to get that fancy new home after all. That has a domino effect: fewer homes will be sold down the line, and so property values will stagnate. Towns will bring in much less money and be forced to cut services or raise taxes, lather rinse repeat. Capps helpfully calls that a “death spiral.”
The third thing that could happen is yet another race for the exits. If state and local taxes are eating wealth, people are going to up stakes and head south or west. It’s already happening: that’s part of why the state’s finances are in such disastrous shape. Revenue projections have been consistently falling short — and where do we think that money’s going? I’ll tell you: Florida.
It’s not just the rich who will leave, though. Less money in state and local coffers means fewer services, including the sorts of things the young professionals we desperately need are looking for, such as better public transit. They won’t stay — or they won’t come at all. So yeah, that sounds like a death spiral to me. Thanks, Trump.
What do we do about it? I don’t actually know.
I mean, we could do some radical things like abolishing any town under 10,000 residents, or merging the cities with all of their surrounding suburbs. We could let cities charge hotel taxes and local sales and restaurant taxes, too.
We could also stop funding state employee pensions and let the debt (and lawsuits) pile up, or we could close some prisons, courthouses, and maybe a state university or two. We could cut taxes and pray like heck that it somehow jumpstarts our economy enough that we can pay for next year (it won’t). We could put tolls on the highways and charge everyone ten bucks to drive on I-95, too, which actually sounds pretty good.
But even if we do those things it feels like we’re still fighting just to keep our heads above water. Whenever it seems like we make some progress, deficits roll inexorably in like the tide. Our constantly gloomy outlook just makes everything that much worse.
I was up at a concert in Northampton, MA, a few weeks back and one of the singers, Dar Williams, talked about how places have self-esteem. She spoke about how great the Pioneer Valley was, how everyone has this civic spirit and this wonderful sense that they could change things. Everyone cheered, and I could feel how proud they were of their home.
When was the last time any of us felt that way about Connecticut?
I have to believe there’s a better future out there for us, but we have to want to get there. If we don’t, we’ll never find the will to solve our problems. Why would anybody save a place they’ve already given up on?
Susan Bigelow is an award-winning columnist and the founder of CTLocalPolitics. She lives in Enfield with her wife and their cats.
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