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Yankee Institute Advocates for Property Tax Increases (likely without knowing it)

Yankee Institute Advocates for Property Tax Increases (likely without knowing it)

The Yankee Institute recently released a report titled, The Case for CT’s Fiscal Guardrails, where they “confirm” the 2017 legislation enacting these measures has saved the state more than $170 million since established to shore up growing state debt.

Now, before I go any further it is important that we take a walk back in time. In mid-October 2017 the General Assembly’s majority party appeared poised to pass (with Governor Malloy’s support) a budget that would have shifted teachers’ retirement costs off the state and onto CT towns and cities. Fortunately, in the face of strong opposition from CCM, warnings from bond rating agencies and outcries from communities across CT, three majority members of the Senate joined with the minority party and voted no. This action forced legislators back to the table and, with CCM’s support and praise, a bipartisan budget was enacted that contained budgetary guidelines that are now commonly referenced as fiscal guardrails.

CCM remains philosophically committed to the need for fiscal guardrails designed to ensure past debts are covered and future spending is focused. However, when you unwrap the proverbial present that is, you’re left with a realization that the guardrails have been used as a smokescreen to raise taxes through the property tax. In the same manner as the teachers’ retirement shift would have done if enacted back in 2017 (note Governor Lamont tried this tax shift again in 2019 when he took office and again it was rejected).

Examining this further it is easy to see Connecticut’s conservative watchdog has either determined property taxes don’t matter or they are simply blindly loyal to a fractured process that financially harms millions of state taxpayers. In early November a release by Yankee itself referenced a Tax Foundation study that ranked CT as the 47th most burdensome tax climate. However, when you look at the study even deeper corporate taxes rank 31st and sales taxes rank 21st – It is the Property Tax that drives this ranking by coming in 50th! Yes, our high tax climate is predominately driven by what also happens to be the most regressive tax in our tax code.

So, what does any of this have to do with the guardrails? Well to analyze you must first understand that the predominant driver of property taxes in CT is the cost local budgets must bear for public education. Since the enactment of the fiscal guardrails, CT has consistently reduced the state’s proportional share of public education spending and shifted that proportional burden over to local governments (just as was attempted and ultimately failed with both Governor Malloy’s and Governor Lamont’s teachers’ retirement shift proposals). As a result, in real dollars (factoring inflation) Connecticut has reduced the state’s share of public education spending by $407 million annually as compared to 2017 when the guardrails were enacted. According to the US Census, the national average states spend to support public education is 44%. In CT, since the enactment of the guardrails, the state has dipped into the lower quartile at 36% state share. This is not a sound fiscal spending control, it is a calculated spending shift out of the state budget and into the regressive and already overused property tax.

In fact, between 2017 and 2022 - most recent available data – property taxes for residents grew by an average of 2.4 percent per year. All you have to do is look at the $407 million cost shift to local budgets to realize that the guardrails are actually driving property tax increases and compounding the tax burden that disproportionately and negatively impacts lower- and middle-income households.

In fairness, Connecticut’s fiscal guardrails can provide stability; however, as currently crafted they also create financial pressures that are felt most by local governments and, in turn, property taxpayers. A continued defense on policies and practices such as this means a shift in the burden toward more regressive, indirect, and local taxation, further raising overall costs for Connecticut residents. Connecticut residents deserve an open and honest debate over how we can experience the benefits of fiscal restraint without the continued hidden regressive tax increases that are buried within.