It’s been at least two years in the making, but municipalities may be one step closer to diversifying their revenue streams after years of relying solely on property taxes and state aid.
Late Thursday evening the House approved a bill that will increase the hotel tax from 12 percent to 15 percent. The three percent increase will be divided between the host community and 15 regional planning organizations. The vote was 88 to 50.
Rep. Brendan Sharkey, D-Hamden, said the bill will help diversify the property tax which is “choking our state.”
“We have to do something,” Sharkey said. “We have to act.”
He said giving the 15 regional planning organizations two-thirds of the money from the hotel tax increase will help jump start economic development and regional cooperation.
A bigger discussion on how to modify the state’s tax structure and its reliance on the property tax will continue, Sharkey said, admitting that this bill is far from a panacea.
Republican lawmakers weren’t onboard with increasing revenues to help solve the budget woes of cities and towns.
Rep. T.R. Rowe, R-Trumbull, said whenever the state talks about solving problems it consistently looks at increasing revenues.
“How can we squeeze more from the taxpayer or the tourist,” Rowe said. “I don’t think this idea is the type of sea change we need.”
“I certainly don’t think we should be going the route of more taxes,” Rep. Vincent Candelora, R-North Branford, said.
But Candelora also didn’t think piling onto the struggling tourism industry was a good idea either. “The way the hotels see this is: ‘You’re hitting me again‘,” Candelora said. “I think we’re giving them another punch in the mouth.”
Rep. Russell Morin, D-Wethersfield, said the message this bill sends is “we’re listening.” A former mayor, Morin said cities and towns have been asking for this type of relief.
The Office of Fiscal Analysis estimates that the hotel tax increase will generate $9.4 million in 2011 and $18.8 million in 2012.
According to the state’s largest municipal lobby Connecticut is one of only nine states that don’t have some sort of broad-based, local hotel tax. Most neighboring states, including Massachusetts, New York, Rhode Island, and Vermont, allow some form of local taxes on hotel occupancy.