He didn’t get the phase out of the car tax that he wanted last session, but House Speaker Brendan Sharkey wants the conversation on property taxes to continue during the 2014 legislative session.
“Before the current recession we’re coming out of now, the crisis before the crisis was the property tax,” Sharkey said Thursday at a Capitol press conference. “Here in Connecticut, there were people in the state who were talking about open revolt over the property tax and the impacts it was having on their local communities.”
Municipal leaders opposed phasing out the car tax because they didn’t trust the state to replace the nearly $700 million it collects from the tax. The House passed the proposal, but there wasn’t enough support in the state Senate to get it passed earlier this year.
“We have to work with the communities that will be affected by the eventual elimination of the local property tax,” Sharkey said.
Rep. Jeff Berger, D-Waterbury, said that Connecticut is the only state that taxes vehicles according to a town’s mill rate. He said he looks forward to continuing work on “comprehensive car tax reform.”
To prove to municipalities that the state is serious about reimbursing any lost revenue from elimination of the car tax, the legislature established the Municipal Revenue Sharing account and dedicated about $4.9 million to it over the next two years.
“We’ve already committed to the notion of trying to provide cities and towns with a level of compensation for the lost revenue, but ultimately we all have to get to a more efficient place,” Sharkey said.
He maintained that the state has to change its tax system, but danced around the notion the state would have to increase taxes in other areas in order to get there. He said the property tax accounts for 40 percent of all the taxes collected in the state and is the most regressive.
“We have to have a tax system in the state of Connecticut that matches the government that we want and need,” Sharkey said. “Currently we don’t have it. Currently our overall tax system is broken.”
He said when there’s an over reliance on the property tax, bad decisions are made.
“When we have a disproportionate reliance on the property tax, we engage in dumb growth,” Sharkey said. “Because towns and cities have to rely so heavily on it that sometimes bad development decisions occur and we’re not looking at the long run.”
But if the comments from the local officials who attended the press conference were any indication, Sharkey will have another uphill climb in addressing the property tax and other efforts to regionalize services.
Weston First Selectwoman Gayle Weinstein told Sharkey that her town comes in second-to-last in economic development. Like every town, she said hers relies upon the property tax to fund the education system and local government.
“If you start eliminating property tax, if you start eliminating car taxes without another mechanism for funding, it is going to create a big problem in our districts,” Weinstein said.
The Municipal Opportunities and Regional Efficiencies Commission, which Sharkey reconstituted Thursday, is tasked with looking at how local governments can cooperate on a regional level to help find efficiencies.
“We’re hearing from our residents that they don’t want their taxes going to other districts,” Weinstein said. “. . . They’re happy to pay high taxes in Weston, if they know it’s going to fund the Weston School District.
Sharkey said he’s in favor of municipal options and not necessarily imposing these regional efficiencies on cities and towns, but when 169 towns offer the same services he believes that’s “inherently inefficient and costly.” He said the goal of the commission is to eliminate those inefficiencies, but none of it should come with a mandate.
“We have to do everything we can to get out of your way,” Sharkey said.
Weinstein suggested that the legislature look at eliminating some unfunded municipal mandates, which would allow the town to reduce property taxes.
Sharkey told Weinstein he thinks the legislature has done a lot of work on reducing municipal mandates and will continue to do so through the M.O.R.E. Commission.
Madison First Selectman Fillmore McPherson said that if a municipality were knitting one sleeve of the sweater, it feels like the state is unraveling the other sleeve when it comes to unfunded municipal mandates.
Also, McPherson said he’s glad that the state has found efficiencies, but he expects it can find more.
“I would suggest there are a lot more efficiencies that could be coming out of the state,” McPherson said.
The last time the state commissioned a study of property taxes was October 2003. The resulting report, which has been available online for 10 years, did not offer a consensus conclusion to eliminate the car tax. However, it did recommend implementing a temporary spending cap on municipalities to limit spending growth to 2.5 percent per year, or the rate of inflation. That idea seems to have faded from lawmakers’ agendas.