GOVERNOR'S PROPERTY-TAX CAP
THE WRONG SOLUTION FOR CONNECTICUT, ANALYST ADVISES
Governor Rell’s proposed cap on property taxes is the wrong
solution for the recently rising property tax burdens faced by many
Connecticut households, the deputy director of the Center on Budget on
Policy Priorities told state lawmakers Friday.
In testimony before the General Assembly’s Committee on
Finance, Revenue and Bonding, Iris Lav explained that the proposed cap,
which would limit the growth in property tax revenues to 3 percent per year,
is likely to result in severe cuts in local services over time.
“Capping property-tax revenues doesn’t keep the cost of public
services from rising. It only makes it harder for communities to pay for
the services their residents need and want,” said Lav.
For example, a property-tax cap would not change the cost of
providing high-quality education to Connecticut’s children, Lav noted.
Nor would it address rising health-related costs (which are a society-wide
problem), hold down fuel costs, or reduce pension liabilities.
Moreover, Connecticut’s proposed cap is exceptionally
restrictive compared to other caps around the country. Only five
states have fixed caps that limit property-tax growth to 3 percent per year.
Lost Revenue Unlikely to
Be Made Up Through Other Sources
In general, there are three factors that could mitigate the cuts
in local services under a property-tax cap, Lav explained. But none of
these is likely to be effective in Connecticut:
Increased state aid.
The governor’s proposal is accompanied by an increase in
state aid for education. But evidence from other states such as Massachusetts
and California suggests that state aid is rarely sustained over time at a
level sufficient to compensate for a severe property-tax cap, Lav noted. In
particular, state aid is likely to be cut during economic downturns and when
state taxes are reduced.
Connecticut municipalities cannot use other sources of
revenue to compensate for lost property-tax revenues because local governments
in the state cannot levy sales or income taxes. By contrast, 11 of the 13
states with caps that are potentially as restrictive as the governor’s proposal
do have local options for sales or income taxes.
overrides of the cap.
Residents in some jurisdictions could vote to override the property-tax cap, but
Lav cited troubling evidence that overrides are far more common in higher-income
jurisdictions than in areas where residents have more modest means. This raises
the specter that a cap could exacerbate disparities in the quality of public
services in communities around the state.
“The fundamental question that needs to be asked is, What problem
is the proposed cap trying to solve?,” said Lav. “If cuts in state aid
have caused an increase in property taxes, repairing those cuts could address
the problem. Or, if the problem is inefficient local government resulting
from too many jurisdictions or overlapping activities, it needs to be tackled
directly; a cap probably won’t help.
“Or, if some people are paying more in property taxes than they
can afford, Connecticut can expand the ‘circuit-breaker’ mechanism it already
has, which provides relief to people who are elderly or disabled, to households
of all ages with low or moderate incomes. A property-tax cap doesn’t
target tax relief on the people who most need it.”
# # #
The Center on Budget and Policy Priorities
is a nonprofit, nonpartisan research organization and policy institute that
conducts research and analysis on a range of government policies and programs.