Hidden plus for Conn. — tax bill hits NY, NJ even worse

We all know by now that the Republican tax reform is a political hatchet job on blue states and that many homeowners in Connecticut would suffer worse than just about anyplace else.

But the key words there are “just about.” Homeowners in many New York and New Jersey suburbs would lose even more value in state and local tax deductions than we’d lose in Connecticut under the Trump scheme; their state and local levies are generally higher.

And so, amid the rightful rage, we might see a small but real plus for Fairfield County and the rest of Connecticut.

It’s possible that the migration of high-income residents from New York and New Jersey to Connecticut — which is already happening — could increase. Under both versions of the tax bill passed in the U.S. House and Senate, Connecticut’s cost advantage over our two fellow tri-state states would widen.

Predicting the effects of tax policy is notoriously dicey for all kinds of reasons and the picture is constantly changing. The tax plan could prod people to move to lower-tax regions, where, by the way, the weather is probably warmer.

So Connecticut is likely to be a loser overall. Still, said Kathi Mettler, an accounting professor at Fairfield University, “many of the desirable jobs are in the tri-state area, so it’s possible that taxpayers would choose to live in Connecticut over New York and New Jersey.”

We’re not going to see a flood by any means. But factors on the margin matter. Just ask one of the highearning Connecticut residents who left after the top income tax rate inched up to 6.99 percent from 6.7 percent in 2012.

In Rye, just over the state line along I-95, it wasn’t hard to find people who thought Greenwich, or perhaps some other lower Fairfield County burg, would would entice people to move in part because of the lost property tax deductions.

“A lot of people do already, even without the lost deduction,” said Diana Cannon.

She was one. Cannon

recently sold a house in Rye, where she was paying $48,000 a year in property taxes, and moved to Greenwich, where she is renting.

That’s not a wildly outlandish bill in the Greenhaven section of Rye, where many people pay well over $50,000.

Bonnie Rosenzweig, a longtime resident, isn’t about to pick up and move as a result of tax policy changes. Years ago, she and her husband, a Manhattan doctor, looked at Scarsdale, Mamaroneck and Rye.

What about Connecticut? “If I were starting out now I would probably consider it,” she said.

But she added, “It depends on the commute time.” That’s going to be an ever-bigger factor as Connecticut competes for a shrinking pool of upscale professionals in the New York area.

Let’s look at the numbers. The owners of a house in Greenhaven worth $2.5 million will pay a property tax of about $48,000. A few miles away, the owners of a Greenwich home worth the same anount will pay about $21,000.

In Summit, N.J., the local levy on a house of that value is about $46,000.

Other wealthy Fairfield county towns range up to about $45,000. Of course, in many places it doesn’t take $2.5 million to get the same house. In Greenwich, it might take more.

What does that mean under the new tax plan? If Congress and President Donald Trump adopt a measure allowing a writeoff of only $10,000 in property taxes — which is in both the House and Senate versions — a homeowner paying that $48,000 will lose a $38,000 deduction — costing her about $13,500.

The Connecticut homeowner paying, say, $25,000 will lose a $15,000 deduction — at a cost of about $5,500.

That’s a savings of $8,000 a year. Add that to a small additional savings because the New York and New Jersey income taxes are somewhat higher, and it starts to be one consideration.

Enough to sway minds? “There’s not a lot of evidence that tax rates cause a lot of migrations,” said Christopher Jones, senior vice president and chief of planning at the Regional Plan Association, a nonprofit group in the metro area. But he added, “There’s always going to be some households for which that will make the difference.”

Even without the added factor, the movement of people from New York and New Jersey to Connecticut is significant.

Connecticut lost an average of 17,278 people to other states in the five years between 2012 and 2016 — when we subtract the number leaving from the number coming in. In 2016, the figure was an astounding and scary 37,328.

But in those five years, New York sent an average of 8,422 more people per year to Connecticut than we sent to the Empire State, and New Jersey sent an average of 2,177. And based on reporting by my colleague Alexander Soule, it appears that the movement to Fairfield County from New York and New Jersey suburbs is even higher.

The cost pressure on the whole region will wash out any advantage Connecticut might have, said Edward Deak, a retired Fairfield University economics professor who looked at the movement of people and jobs for more than 30 years. The bright side? Connecticut will benefit from Trump’s military buildup, Deak said.

The competition is all the more fierce. Connecticut, like other states under siege, will have to work harder to deliver value for the tax dollar and will have to find new sources of revenue such as tolls, casinos and marijuana. Towns will be under huge pressure to cut costs.

Even with a slight advantage within the region, Mettler said, “It’s still going to be up to Connecticut to be the more favorable location.”