Let towns have their own sales taxes

The Middletown Press (Middletown, CT) - - LOCAL NEWS - Terry Cowgill CTNews Junkie.com

In an ef­fort to fill a pro­jected yawn­ing gap in the up­com­ing bi­en­nial bud­get, law­mak­ers in Hartford con­tinue to con­sider a wide va­ri­ety of rev­enue en­hance­ment op­tions. In my last col­umn, we ex­plored the pro­posed plas­tic-bag tax.

But a pro­posal to al­low the state’s 169 mu­nic­i­pal­i­ties to im­pose their owns sales taxes is an idea worth pur­su­ing. That’s be­cause it would not man­date any new taxes but would in­stead pass the buck and em­power towns to pig­gy­back on the state’s 6.35-per­cent sales tax. And if im­ple­mented the right way, it would also al­low the leg­is­la­tors a mea­sure of plau­si­ble de­ni­a­bil­ity (e.g. “We didn’t pass new taxes; your town did”).

The idea gained cur­rency in Jan­uary when the Con­necti­cut Con­fer­ence of Mu­nic­i­pal­i­ties is­sued a sweep­ing re­port rec­om­mend­ing, among other things, low­er­ing the state sales tax and de­creas­ing the num­ber of ex­emp­tions, but al­low­ing re­gions and mu­nic­i­pal­i­ties to add a sales tax of their own of no more than one per­cent­age point.

The idea makes sense be­cause, un­like towns and cities in most other states, Con­necti­cut’s mu­nic­i­pal­i­ties rely al­most ex­clu­sively on prop­erty taxes for rev­enue col­lec­tion. The prob­lem is es­pe­cially acute in Con­necti­cut be­cause we lack any sort of re­gional gov­ern­ment to share the costs of town roads and bridges, among other things.

The idea is pop­u­lar enough that state Se­nate Pres­i­dent Martin Looney has come up with a mod­est pro­posal of his own. As part of his agenda for this year’s leg­isla­tive ses­sion, Looney has pro­posed giv­ing towns the op­tion of ad­ding a half a per­cent­age point to the state sales tax. To save the towns the ex­pense of hir­ing ad­di­tional staff to col­lect it, the tax would be col­lected by the state but its rev­enues would be­long to the towns that choose to en­act it.

“Through­out the en­tire his­tory of Con­necti­cut, mu­nic­i­pal­i­ties have been per­mit­ted to di­rectly raise lo­cal rev­enues only through a sin­gle source: the prop­erty tax,” Looney said. “This restric­tion is unique to the New Eng­land re­gion, a legacy of our shared his­tory dat­ing back to colo­nial times.”

If all 169 mu­nic­i­pal­i­ties were to ex­er­cise their op­tion to en­act the full 0.5 per­cent sales tax, the non­par­ti­san Of­fice of Fis­cal Anal­y­sis es­ti­mates they would col­lec­tively raise ap­prox­i­mately $214.5 mil­lion in lo­cal sales tax rev­enue. But CCM’s study is more am­bi­tious and more seg­mented, though it would bear more fruit.

The study ad­vo­cates for a 1 per­cent statewide lo­cal sales tax that it es­ti­mates would bring in $670 mil­lion an­nu­ally for lo­cal gov­ern­ment and re­quire that $324 mil­lion be used to fully fund the state’s PI­LOT pro­gram and the $346 mil­lion re­main­ing would be dis­trib­uted un­der the cur­rent for­mula for lo­cal con­struc­tion projects.

For Looney’s part, he em­pha­sized — and this is im­por­tant — that the goal of the lo­cal op­tion sales tax “is not to grow the size of mu­nic­i­pal gov­ern­ment, but rather to en­able our towns to di­ver­sify their lo­cal rev­enue base.” Ex­actly. And Looney added that he be­lieves towns need to re­duce their reliance on the re­gres­sive prop­erty tax.

I don’t know how re­plac­ing part of one re­gres­sive tax (prop­erty) with an­other (sales) is pro­gres­sive. But that’s nei­ther here nor there. Giv­ing towns the op­por­tu­nity to di­ver­sify their rev­enue sources is the more im­por­tant piece any­way.

Con­necti­cut is one of the few states in the na­tion that has no lo­cal sales taxes. Our neigh­bor to the north, Mas­sachusetts, has an in­ter­est­ing and, by most ac­counts ef­fec­tive, sys­tem for col­lect­ing lo­cal sales taxes.

There is no op­tion for a broad-based lo­cal sales tax in Mas­sachusetts, but since 2009 towns have had the op­tion of im­pos­ing a 0.75 per­cent tax on meals, which they get to keep. A sim­i­lar op­tion en­ables towns to tax ho­tel rooms. Those taxes have been quite a boon to many Bay State towns and cities and have helped to mit­i­gate up­ward pres­sure on prop­erty taxes. Yet an­other pro­posal await­ing ac­tion on Bea­con Hill would al­low towns to add on to the state’s gaso­line tax.

Al­low­ing Con­necti­cut’s towns and cities to im­pose their own sales taxes could bring in much­needed rev­enue for roads, bridges and other in­fra­struc­ture. And if Gov. Dan­nel Mal­loy’s bru­tal pro­posal to push onethird of the teach­ers’ pen­sion costs off onto the towns ever be­comes law, the lo­cal sales tax op­tion could blunt the trauma. More­over, Hartford Mayor Luke Bronin has sug­gested it could po­ten­tially save the city of Hartford from bank­ruptcy. Iron­i­cally, Mal­loy is said to be cool to the idea of lo­cal sales taxes.

Per­haps Mal­loy could be per­suaded to re­con­sider. Or per­haps he could be per­suaded to bet­ter ex­plain his qualms. Af­ter all, dras­tic times call for dras­tic mea­sures, no?

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