Connecticut’s Property Tax System

 

 

December 1, 2005 Statement Before the

The Legislative Program Review and Investigations Committee

By Susan Kniep,  President,
The Federation of Connecticut Taxpayer Organizations, Inc.

 

I appreciate the opportunity to speak before you this evening. 

 

I am Susan Kniep, President of The Federation of Connecticut Taxpayer Organizations, Inc.  Property owners throughout Connecticut are struggling to maintain ownership of their most prized possession, their homes.  With annual property tax increases exceeding their income growth, many property owners are forced to choose between the basic necessities of life or their property taxes to keep from losing their homes. 

 

There is a correlation between the property tax structure in our State, and the Eminent Domain issue in Connecticut where private interests can usurp the rights of private property owners if the price is right.  If someone cannot afford to pay their property taxes, a lien by the municipality is placed on their home or business.  Ultimately a municipality can force the sale of that property to a private party.   

 

The injustice in Connecticut’s property tax structure is that we are being taxed on unrealized capital gains.   Unlike our stocks or bonds wherein we are taxed upon the cash we receive as a result of sale or any interest or dividends actually received, the value of our home is something simply written on paper on which we are taxed.  We do not have the cash in hand realized from the sale of our homes to pay for the steady tax increases imposed upon us. 

 

State Statutes governing Revaluation place a cost burden on taxpayers not only through the significant increases of our properties as documented on a piece of paper but also that which a municipality must budget to facilitate the process.  In essence, the State is keeping those within the Revaluation industry fat and happy, while taxpayers become poor. 

 

I am in real estate.  I have heard from seniors who had been forced to go on Medicaid because they had no health insurance, they continue to live in their homes, the state has liens on their homes, they cannot afford to pay the property taxes that continue to increase on the value of their homes, and yet they cannot sell their homes. 

 

Some homes have been passed down from generation to generation.  Yet, the current generation cannot sustain ownership of the property due to tax increases.

 

The property tax structure in Connecticut is in crisis.  Yet, we cannot address this issue without concurrently looking at the issue of State Mandates.   Those laws which you impose upon municipalities which carry a financial burden upon local property taxpayers.     Two mandates which are bankrupting municipalities are Binding Arbitration and Prevailing Wage.    Our laws must be changed to prevent the driving costs of wage and healthcare benefits in union contracts due to Binding Arbitration and the high cost of construction born by local taxpayers due to the existing Prevailing Wage mandates.  Approximately, 75% to 85% of municipal budgets support municipal personnel related expenses.  While those who work in the private sector “At Will” are losing their jobs, or taking a cut in pay and/or paying more for healthcare benefits for themselves, they are also picking up the tab to pay for high healthcare costs for town employees which are factored into municipal budgets which are driving up property taxes.  This is wrong in that town employees should be paying healthcare costs similar to what is being forced upon those in the private sector. 

 

Municipalities, unlike the State, have only two primary means of raising revenue,  property taxes and fees.  In contrast, the State of Connecticut has placed a tax on nearly every facet of our life, from the tax on a movie to the conveyance tax on the sale of our homes. 

 

I again emphasize that the current property tax structure is creating a crisis in our state.  The solution is to tax real property on its value established at the time of sale, reform our state mandates, and think out of the box. 

 

Recently, I had written to Governor Rell and our local legislators proposing that municipalities be allowed to retain 1% of the 6% sales tax generated from new businesses established at Enterprise zones.    As you are aware Enterprise zones allow for tax breaks for new businesses thereby affecting the amount of tax a municipality receives, while taxpayers pays for services to sustain these businesses.  I ask that your Committee consider such a proposal.  Further, there should be a mandatory audit of municipalities which receive at least thirty per cent of their revenues in any fiscal year from the state.  This was a proposal made this year by the legislature and should be approved, along with campaign finance reform and ethics. 

 

It has become apparent within the past few months, that our taxes have been driven by corrupt business practices at the state and in some municipal governments.  It is also apparent that we have a dire need for campaign finance reform to prevent influence peddling usurping sound business practices.    The State and the 169 individual towns must put their finances in order.  There must be accountability of government expenses while concurrently providing accountability of those who have a fiduciary responsibility over the money taxpayers give them to finance State and local budgets.  

 

Thank you for your time, and again I ask that you consider allowing municipalities to retain 1% of the 6% sales tax generated from new businesses within enterprise zones in municipalities as well as the implementation of a tax structure which establishes the true assessed value of a home upon its actual sale.