“Tax Equity” Proposals Call For Reducing Regressive Sales and Property Levies, Raising Rates On Wealthy
By John McNamara
Bills that would dramatically alter the way Connecticut taxes individuals and businesses were the subject of a marathon hearing at the Legislature’s Finance, Revenue and Bonding Committee on March 15th. An overwhelming majority of the more than 300 individuals who testified supported tax reforms but passage will face significant hurdles in the 2021 session.
The “tax equity” proposals, co-sponsored by New Britain Democratic legislators State Senator Rick Lopes (D-6), State Rep. Manny Sanchez (D-24), State Rep. Bobby Sanchez (D-25) and State Rep. Peter Tercyak (D-26) and other lawmakers, provide tax relief to low- and moderate income households by reducing reliance on regressive sales and property taxes. High-income households would be taxed more than the current maximum of 6.99%. on their incomes to make up the difference.
A key provision contained in HB 6187 and SB 821 would adjust the state income tax on individuals earning $500,000 or more and joint filers earning $800,000. Proponents say the adjustments would make income tax rates fairer by raising the rate to 8.82% for individuals at $500,000 and joint filers at $800,000. For households earning $1 million or more the rate would rise to 12.69 percent. Governor Ned Lamont opposes any change in the current rates but a significant contingent of lawmakers. in the Democratic caucus are pushing changes to lower the overall tax burden on individuals and families below $500,000. Raising rates on wealthier households would generate $1.75 to $2 billion annually.
A coalition of unions and advocacy groups that mobilized turnout for the all day March 15thhearing assert that legislation would level the playing field and make the tax system fairer. According to a Voices for Children tax reform report “Advancing Economic Justice Through Tax Reform” issued last December, median income households with $76,106 in pre-tax income pay an effective tax rate of nearly 14% while the top one percent of tax filers with an average income of $3,092,389 have an effective tax rate of 6.5%. The effective tax rate takes into account the total tax burden of property, sales and income taxes on taxpayers. It means that a nurse or salesperson earning less than $100,000 now pays double the taxes comparably to wealthy individuals whose burden has been reduced further in recent years as the result of the Trump tax cuts for the “one percent” with incomes in the millions and billions.
A 2% statewide property tax “on the portion of the market value of homes in excess of $1.5 million” also dubbed the “mansion tax” drew opposition at the legislative hearing from worried homeowners, most of whom would not be effected by the levy on only the highest value residences. The tax on “mansions” with assessed values exceeding $1 million would raise $663 million. The same “mansion” tax is proposed in SB 171 with State Senate President Martin Looney sponsoring the stand alone bill.
Tax relief for the working class is part of the comprehensive legislation with an expansion of the Earned Income Tax Credit (EITC) to 50% of the federal tax credit at an estimated cost of $155 million. The Senate version of the bill also includes a state child tax credit similar to federal Rescue Act one designed to reduce child poverty. For property tax relief the tax credit would double to $400 on homes and motor vehicles at a cost of $63 million. For COVID 19 relief a direct payment of $500 would be sent to individuals who have faced hardships and unemployment over the last year.
The Finance committee is also considering other provisions of the tax equity legislation that would generally lower the tax burden on working and middle income residents:
- A 10% tax on digital ads placed in Connecticut by companies with digital ad revenue of more than $10 billion (Google, Facebook, and Amazon) generating $140 million annually.
- Lowering the estate tax exemption to $2 million, eliminate the payment cap, and enact estate tax rates similar to the rates in effect before the Great Recession. This would generate approximately $162 million annually.
- Increasing the base corporation business tax rate to 11.5% for corporations with gross income of $100 million or greater and extend and increase the current surtax to 20%. This would generate approximately $250-300 million annually.
- Imposing a surtax of 5% on capital gains, dividends, and taxable interest for individuals with income in excess of $500,000 per year ($800,000 for joint filers). This would generate approximately $850 million annually.
Proponents of the legislation face a considerable amount of misinformation about impacts on working and middle income households whose effective tax rates would stand to be reduced by passage. Any tax adjustment in the direction of equity always elicits arguments that the big taxpayers that the state depends on would flee like snowbirds to Florida and that businesses would go offshore if they haven’t already to avoid paying more taxes. Standing in the way of any change and buying into those arguments is Governor Lamont who made a “no new taxes” pledge to the Connecticut Business and Industry Association last week.
It remains to be seen how much the Democratic caucus and its leaders can move Lamont to support one or more of the provisions intended to reduce regressive taxes and make Connecticut’s tax system more equitable. Some are hopeful that Lamont will take a page from President Biden who is now calling for a higher rate on wealthy individuals making over $400,000 for public investments like infrastructure and to address a spiraling federal deficit from the Trump years.
For now the Finance, Revenue and Bonding Committee, co-chaired by Hartford State Senator John Fonfara and Shoreline State Rep. Sean Scanlon, has its hands full in sorting out what provisions will move to a full vote in the General Assembly this session.
Did Stewart Get A Prohibited Campaign Freebie In Mailing Of Car Tax Bills?
By John McNamara
New Britain motor vehicle owners finally got their bills on September 1 along with a glowing missive from Mayor Erin Stewart that makes the case for her re-election.
The city held up auto tax notices this year, blaming the state budget impasse for the two month delay. Uncertain was whether the auto levy would be lowered to 32 mills or stay at 37. Given the state deficit then and now, it would have been a safe bet to go with the 37 mill rate in July rather than wait. The $241.5 million municipal budget for the year that began July 1st is based on what New Britain got from the state in the 2017 fiscal year.
In a city election year the delay in mailing tax bills is giving incumbent Stewart a prohibited taxpayer-funded freebie — an expensive city-wide mailing to everyone who owns a car or truck — to boost her campaign closer to the election.
Don’t expect Stewart and her full-time image team in the Mayor’s office to miss an incumbent’s prerogative of using public funds to deliver a not so subtle piece of campaign promotion. Normally there’d be nothing wrong with it. It’s done here and in many places all the time — an advantage to incumbents in local races with no public financing
Brochure advancing Mayor Stewart’s candidacy sent with motor vehicle tax bills this week. State law bars use of public funds for candidate promotions within three months of elections.
The issue usually arises over “franking privileges” for state and federal lawmakers who send their own positive mailers back to their districts on accomplishments and legislation.
At issue here is whether Stewart used the good offices of the Tax Collector to promote her candidacy within three months of an election. That’s where the Connecticut General Statutes come in. State law prohibits any use of taxpayer money by incumbents within 90 days of an election for self promotion.
From Connecticut general statutes 9-610
(d) (1) No incumbent holding office shall, during the three months preceding an election in which he is a candidate for reelection or election to another office, use public funds to mail or print flyers or other promotional materials intended to bring about his election or reelection.
Using her campaign slogan “Leading The Way” in the taxpayer-funded brochure, Stewart cites saving the city from fiscal ruin, good bond ratings, reorganizing city hall departments “to find efficiencies and improve customer service and “a continuous commitment to provide our teachers and our children with the proper tools for learning and exploring.” The official message is a carbon copy of what can be found on Stewart’s campaign website.
Any and all of the Stewart’s tax mailer assertions, of course, can be challenged in an election year. A closer look at the municipal budget shows higher spending trumps efficiency at City Hall. A hefty jump in interest payments looms on short-term borrowing because Stewart and the Common Council deferred on paying bills coming due last year. And that “continuous commitment” to education? It’s hard to find in a Stewart budget that continues to spend more at City Hall but didn’t add a dime to schools in the current budget.
In politics timing can be everything and can determine what is allowed and what isn’t under the law.
By incorporating her campaign promotion in the late auto tax notices , Mayor Stewart ignored the law that bans incumbents from using public funds “to mail or print flyers or other promotional materials” for reelection.
“Revolutionary” State Budget? Property Tax Relief, New ED Aid For NB Is Part of Democratic Package
by John McNamara
A tentative agreement among Democratic leaders on a biennial state budget that begins July 1st appears to be good news for New Britain and other municipalities in terms of property tax relief and continued aid to the under-funded city schools.
Late Saturday (May 31) Democratic legislative leaders and representatives of the Malloy Administration agreed on a revenue package that will drastically cut the car tax. The measure will set aside the city’s property tax rate of 49 mills on vehicles and cap the tax for cars to no more than 29 mills in a statewide formula. The levy on vehicles will be in effect for the 2015 tax year if OK’d in a final vote. At the same time the plan will designate a percentage of sales tax revenue for transportation and new funding to cities and towns to reduce burdens on property taxes.
New Britain’s legislative delegation will wrap up the 2015 session June 3. From left Rep. Bobby Sanchez (25), Rep. Peter Tercyak (26), State Terry Gerratana (6) and Rep. Rick Lopes (24). Absent from photo is Rep. Betty Boukus (22). ( F Gerratana photo 2014)
The Democratic package, if approved by the Legislature, represents the most significant change in Connecticut’s tax structure in decades, making the system more progressive and fairer to New Britain and other cities.
Taxes will most certainly increase by a smidgen for high-income individuals with the ability to pay. For most citizens burdened by one of the nation’s heaviest property tax burdens there is relief. State Senate President Martin Looney (D-New Haven) called the proposal “revolutionary” and said “this budget meets the state’s obligations and provides historic property tax relief for the people of Connecticut,” It includes provisions to:
– Raise the income tax rate on millionaires from 6.7 to 6.99 percent
– Maintain the state sales tax at 6.35 percent and designating half a percent each to local property tax relief and the Malloy transportation initiative. Proposed sales taxes on accounting, engineering, advertising and dry cleaning were eliminated from the plan.
– Triple the tax on computer and data processing from 1 to 3 percent.
– Adjust Payment In Lieu of Taxes (PILOT) grants to municipalities with high mill rates where state property and nonprofit institutions hold significant amounts of property.
As the legislative session ends New Britain’s legislators have been mobilizing to retain a fair share of municipal aid, support state-funded programs and maintain New Britain’s share of education funding.
Details will be forthcoming over the next several days, but it is likely that the delegation has succeeded and the city will improve on the $85 million (covering 68%) it now gets under state cost sharing formula to underwrite the education budget proposed by the Stewart administration at a flat-funded $124,183,673.
Despite billion dollar deficits confronting the Malloy administration and legislators in state budgets since 2011, New Britain’s education aid has steadily increased over the last four years. It will do so again if the budget package wins approval by Wednesday, June 3.
To be sure New Britain schools will remain under-funded in comparison to comparable communities in the absence of more equity in the way educational funding is distributed. The state budget package now on the table, however, is a step in the right direction. New Britain has fallen behind more sharply than others because of a consistent pattern of the city setting budget priorities that stiffed the schools year after year, but increased spending in municipal government. This year is no exception.
Attention now turns to the adoption of the municipal budget. The Common Council is due to act on the Stewart Administration’s $224,757,851 budget and 49 mill tax rate by mid-June. No matter how the city acts there is now room for optimism on property tax relief and education aid given the prospect of a “revolutionary” state budget plan being adopted.
Absentee Landlord Licenses, Fees Exist In Many Communities
Updated November 21, 2012: Legitimate concerns about the city’s licensing of absentee landlords (all owner-occupied dwellings are excluded) have been drowned out by a phony anti-government coalition fueled by out-of-town interests and a failed GOP leadership seeking once again to use divisiveness for political gain. The well-publicized and well-financed campaign of distortion is now replete with paid protestors, intimidation of tenants and outrageous lies about the ordinance and who would be affected by it.
On October 4th, New Britain’s Common Council adopted new fee ordinances on landlords owning non-owner occupied, multi-unit apartments — policies designed to raise an alternative source of revenue as well as to strengthen anti-blight enforcement in multi-unit housing.
The $150 per unit flat fee represented a compromise over an earlier proposal that the Council’s Planning and Development committee left on the table. It will raise an estimated $1 million on rental properties with absentee owners.
A second ordinance known as a “hot-spot fee” would charge landlords $500 when emergency and public safety personnel are called to an apartment house five or more times in a year. It is expected to generate another $1 million.
The combined measures can avert some service cuts and improve the anti-blight efforts as Mayor O’Brien and the Council seek to fill a $4 million hole growing out of the structural deficits identified in the last fiscal year when O’Brien took office. Clearly, they are not a panacea for the budget woes that stem from nearly a decade of gimmickry and one-short revenues of prior administrations. The license fee is part of a strategy to avoid regressive taxation in tough fiscal times: raising the property tax always falls disproportionately on homeowners and those least able to afford it.
The Common Council’s actions occurred amid a raucous and at times churlish crowd of opponents prominently led by the statewide landlord lobbying group which opposes the fees and previously opposed tougher anti-blight measures that the O’Brien Administration has adopted.
According to press reports, Bob De Cosmo, president of the Waterbury-based Connecticut Property Owners, said his group will file a class-action lawsuit against the city. In an effort to bully and intimidate city councillors DeCosmo was quoted as saying “we will be looking into suing each individual council member that voted for this illegal tax.”
The hollow threat of a legal fight over the modest New Britain flat fee flies in the face of policies and fees that are found in many other communities throughout the country and that have been on the books for a good long time.
In Connecticut, for example, Stamford has an annual fee structure on multi-family units tied to housing code enforcement: a $60 fee and $30 per additional unit for three to nine apartments; $75 and $40 per additional unit for 10 to 39 apartments, and; $200 fee and $60 per unit for 40 or more apartments. Sounds doubtful absentee landlords will dump their New Britain properties to go buy dwellings downstate. Nor will they pull up stakes and go to places like Gainesville, FL, North Chicago IL, Burlington, NJ, Cedar Rapids IA, Salt Lake City UT, Minneapolis, MN (and many more). They’ll find landlord fees and licenses and charges for rental units in all of them.
One other thing municipalities here in Connecticut and elsewhere have as a sensible part of housing policy is a Certificate of Occupancy ordinance. That was lost to New Britain in the 1980s when Tom Bozek was the Council majority leader. It would be a feather in the cap to Mayor O’Brien and the Council to restore the CO ordinance, not just for fees but to fairly handle the rights and responsibilities of landlords and tenants.
The Mayor and Common Council clearly didn’t deserve the insults and push back at the Council meeting from some of the attendees, particularly absentee landlords who need to learn a lesson in shared sacrifice without diminishing a return on their investments. They need to be responsible members of this community whether they live here or not.
Op-Ed: CEOs Rewarded for Corporate Tax Dodging
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Other Words Op-Ed: Week of September 5-13
CEOs Rewarded for Corporate Tax Dodging
by Chuck Collins |
Chuck Collins is a co-author of the new Institute for Policy Studies report, “Executive Excess 2011: The Massive CEO Rewards for Tax Dodging.” www.ips-dc.org
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