HARTFORD, CT — The state’s largest organization of local leaders came out in support of a plan Wednesday to raise the state’s sales tax rate from 6.35 percent to 6.99 percent as long as the increased hundreds of millions generated would be sent back to the municipalities.
The Connecticut Conference of Municipalities says the increase in the sales tax rate could provide an estimated $440 million to towns and cities, but only if the state doesn’t take a cut of the proceeds in the process.
CCM Executive Director Joe DeLong said the organization supports the tax hike to boost revenue and reduce dependence on a regressive property tax system.
However, the group’s support is “contingent on other important cost-control measures being adopted by the General Assembly,” DeLong said.
“We need to have cost containment” along with a sales tax increase to prevent the additional money coming in “being spent like we’re drunken sailors,” he added.
Betsy Gara, executive director of the Council of Small Towns, said her organization supports the legislation because “property taxpayers have had a bullseye on their backs” for too long and increasing the sales tax is “a fairer plan.”
Nonprofit organizations are opposing the bill because it also includes language to eliminate the sales tax exemption on goods and services provided by nonprofit organizations. This part of the legislation would cost nonprofits about $216 million a year.
Peter DeBiasi, chairman of the board of the CT Community Nonprofit Alliance, said the proposal would “would take funds from services for people with developmental disabilities and homeless shelters, from people struggling with substance abuse, victims of domestic violence, and arts and cultural programs, among other services.”
He said nonprofits have been exempted from the sales tax because “they provide services in their communities so that government does not have to.”
Rep. Jason Rojas, D-East Hartford, argued that eliminating the sales tax exemption and broadening the base is a conversation municipal leaders have been looking to have.
He said that’s a more desirable conversation than any discussion about allowing municipalities to tax the real property of nonprofit organizations.
House Minority Leader Themis Klarides responded as well, saying talk of taxing nonprofits “is one of the saddest things I’ve seen in this building in 18 years.”
Klarides, a Republican from Derby, said it is no secret that nonprofits “do the job better, more effectively and get better results” than state government does. “We put more and more burden on them and now we are taxing them?”
That’s when things got a little tense.
“It would have been nice to perhaps have a hearing on your budget proposal that we have yet to see,” Rojas told Klarides.
“Do you really want to go down that road?” Klarides asked Rojas. “You show me yours (budget proposal), I’ll show you mine.”
Klarides said the Republicans will be releasing their own budget proposal later this week.
While CCM said it supported the increase in the sales tax, it also urged that language in any final tax bill should include the following caveats:
• Revenues generated by an increase in sales tax should not be considered within the purview of a municipality’s ability to pay for the purposes of collective bargaining;
• Service sharing arrangements should be removed as a subject of collective bargaining to prevent municipalities from bargaining away, or losing through arbitration, their right to enter into service sharing arrangements, and;
• When service sharing arrangements affect two or more collective bargaining units, the interests of the workers should be represented by one, collective voice.
CCM said it also supports the part of the bill which would equalize and provide funds for the payment in lieu of taxes program, or PILOT, at the reimbursement rate of 55.5 percent. The current reimbursement rate is 77 percent for college or hospital property and 45 percent for state-owned property.
But CCM states that “in reality the reimbursement rate is well below this, creating a large, unfunded mandate that shifts the burden to residential and business taxpayers. This would provide a needed and immediate relief to municipalities that host significant numbers of non-profits, hospitals, colleges, universities, and state properties, which are exempt from local property taxes.”
Hartford Mayor Luke Bronin said that CCM’s position on supporting the increased sales tax was a really important step forward.
“For too long we have been too dependent on property tax,” said Bronin, whose city of Hartford has its own fiscal crisis. “All of us are facing this constant pressure on property tax.
“This is not a big city issue,” Bronin added, stating that the over-reliance on property taxes create pressure that is felt in big cities and small towns alike throughout the state.
Portland First Selectwoman Susan Bransfield, who is CCM’s president, reiterated other speakers’ comments suggesting that Connecticut needs to get away from relying on the “regressive property tax system” to fund town programs.
“This system especially hurts senior citizens” who are often living on a fixed income, Bransfield said.
The Finance, Revenue, and Bonding Committee has until Friday to decide whether they will take up any of the proposals.