Property taxes are in many ways the most regressive and economically oppressive taxes, resulting in a downward spiral for municipalities, businesses and individuals already in financial distress.
The greater the tax burden, the higher the mill rate and the more distressed the taxpayers become. Even when businesses close and individuals are losing their jobs, their security, and their homes, property taxes must be paid.
There are numerous ways in which property tax relief could be provided to municipalities, and the 1000 Friends organization has recommended several ways, all of which are good ideas and could be part of a package.
However, there is a central element of every municipal budget that needs to be addressed directly: the number of public school students, per taxpayer and also per dollar in the tax base, varies significantly from one municipality to another. And the tax rates tend to be the highest in our poorest municipalities.
Moreover, public schools are the largest line in every municipality’s annual budget. Our wealthiest communities not only have a higher tax base to provide some of the best public schools in the nation, but many of their households send their children to private day schools and boarding schools, resulting in a lesser burden for the community.
Low local property taxes in wealthy cities tend to attract the businesses with the largest investment in taxable properties, further distorting the unequal tax burden between communities. Conversely, communities with a low tax base tend to discourage investment in taxable properties, while low property values in these communities tend to attract charitable organizations to address community needs in inexpensive quarters that pay no property taxes. Education has suffered greatly as a result in most of these communities.
Thus, the spiral continues in this high property tax state. And justice in housing, municipal services, and in overall tax burden continues to become more uneven. So what is the remedy?
The state should assign a set percentage of the state income tax each year to a Governor’s Property Tax Relief Fund (GPTRF) that would dole out its income at the end of each fiscal year to the every municipality, based on the number of children in the local public school system. Municipalities would send out their property tax bills with an unchanged municipal mill rate, but the total tax due would be reduced by that taxpayer’s share of the GPTRF that was allocated to the municipality.
The income tax is the least regressive of taxes in Connecticut – you don’t pay anything if you lose your job and don’t have an income, and you pay a low rate when your income is small. If you are wealthy, you pay more, although your total tax burden (including sales, property taxes and fees) is still lower than the average taxpayer. And when the wealthy fall on hard times, their income taxes fall, easing their burden.
However, income taxes are notoriously uneven, so the GPTRF would need to allocate a set amount of its income each year, based on an average of the income tax taken in over five years, so that taxpayers can have some idea of the degree of property tax relief they can expect in the coming year.
Such a formula would provide the most relief in a targeted way that should be fair to all communities, and would provide the most relief to those communities the have the highest property tax burden from the high costs of education.
And if this means that we would have to add a small increase to the taxes of our wealthy in the future to assure continuation and significant property tax relief through the GPTRGF, so be it. It is high time the paid their fair share of the total tax burden in Connecticut. The working middle class deserves a break.
David Bingham MD lives in Salem.
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