Despite having won his reelection by double digits, Gov. Ned Lamont showed in his opening comments to the General Assembly that 2023 is not the time to use his rightfully acquired political capital. Instead he has chosen to follow the same playbook that helped lead to his win: smile, avail himself of press opportunities and ignore substance.
Lamont has said that the primary goals of his second term are to concentrate on economic development and provide middle-class tax relief. And yet, like the hands-off corporate executive that he is, he lets subordinates worry about the details without showing any intellectual interest in delving into the underlying structural impediments to Connecticut’s economic revival.
If he did, he’d find that the biggest cost to Connecticut businesses and taxpayers is the property tax, which makes up 43.2% of the total tax burden of state residents.
A new publication, “Property Tax Reform: If Not NOW, WHEN?” by the Property Tax Working Group of 1000 Friends of CT, explains how Connecticut’s property tax system is inefficient, onerous and unfair and lays out the steps needed to be taken for real and lasting reform. And best of all, Lamont doesn’t need to raise any taxes to make it happen. He can provide business- and middle-class tax cuts and finally set the state on a the road to economic recovery.
An understanding of the economic landscape in which Connecticut competes is provided in David Rusk’s “Cities Without Suburbs.” In the time it takes to drive to Greenwich and back, these basic facts can be understood. The economic battlefield on which Connecticut competes nationally and internationally is not defined by state or municipal lines but by metropolitan areas.
Rusk, a former mayor of Albuquerque, NM, examined all the metropolitan areas in post- World War II America. All of them went through massive changes caused by the building of the interstate highway system. What Rusk found was that the metropolitan areas that acknowledged these changes and created new forms of governance saw greater long-term job growth and less economic and racial segregation than those that didn’t. Virtually every reform was led by Republicans who understood the real issue facing their regions was jobs and keeping down the cost of government.
The important takeaway from Rusk’s work is that Connecticut’s refusal to update its strategic framing of economic competitiveness policies from the colonial era leaves us with uncompetitive structural flaws that are manifested in our property tax system. The indifference by policymakers in dealing with solutions leaves in its wake staggering differences in municipal property tax wealth across our state. The consequences create endless remedial costs to our state budget in dealing with the resulting economic and social chaos.
The dysfunction of our economic policy and property tax system causes significant vertical and horizontal inequity. Simply defined: (1) Horizontal inequity means owners of property with similar values are taxed at different rates depending on which town they live in, and owners paying similar tax rates receive widely disparate services; (2) Vertical inequity means low- and moderate-income households are subjected to higher effective property tax rates than high-income households.
Not surprisingly, the inequities in our property tax system leave towns with varying abilities to pay for basic services and education. The New England Public Policy Center, the research arm of the Federal Bank of Boston, calls these deficiencies a needs-capacity gap for funding general government and cost-capacity gap for funding schools. The Public Policy Center developed specific, objective measures to close those gaps. Our recommendations would cost about $1 billion.
The money to begin to reform the state’s tax structure already exists. As our report says, “If the current revenue structure continues to generate an annual surplus, the state’s challenge in implementing property tax reforms is not to legislate new funding to finance the reforms but rather to elevate the status of property tax reforms as a policy priority to make an appropriate claim on the revenue already generated by the current tax system… To reiterate, the challenge of comprehensively funding comprehensive property tax reform is not a deficit of new revenues but rather a deficit of policy that currently gives other programs a higher priority than comprehensive property tax reforms.”
Lamont’s own consultants, Boston Consulting Group, identified a $1.1 billion gap between revenue due the state and what is being collected. Hiring tax auditors would begin shrinking that gap immediately.
When a governor leaves office his unused political capital is worthless. Gov. Lamont, use it now. If not, you will have squandered a golden opportunity to burnish your legacy.
Jeff Davis is a board member of 1000 Friends of CT and a member of the Property Tax Working Group