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The Lessons of the Conveyance-Tax Battle May 8, 2008 It’s likely that most Connecticut realtors don’t remember -- or never heard of -- the Brezhnev Doctrine. But the policy that no nation would be permitted to leave the Soviet-controlled Warsaw Pact alliance, now a Cold War-era factoid, resembles a maddening problem faced by the Nutmeg State’s real-estate industry. Call it the Brezhnev Doctrine of Connecticut Taxation: Once a tax is adopted, it can never be repealed. And once a tax’s rate is increased, it can never be lowered. For years, realtors have assaulted this fiscal tenet again and again, in pursuit of a cut in the conveyance tax. Paid by the sellers of real property, at the local level the tax’s rate was once 0.11 percent -- $330 tacked on to a home sold for $300,000. In 2003, lawmakers and then-Governor John Rowland more than doubled the rate, to 0.25 percent. That $330 tax obligation became $750. (Eighteen “distressed” municipalities were permitted to more than quadruple their rates, to 0.50 percent.) At the time, Connecticut’s more naïve realtors must have taken comfort in the temporary nature of the hike. Many legislators assured them, and the law itself stated, that the tax would revert to its old rate on July 1, 2004. The cut never happened, of course. Local-government officials quickly became addicted to the additional revenue generated by the higher rates. Political elites in Hartford preened that they had finally done something to boost municipalities’ coffers. And lobbying groups And thus, Republican governors and Democratic lawmakers extended the higher tax rate again and again. Despite indefatigable work by real-estate advocates and hundreds of individuals realtors, the 2003 rate was not restored, and in the upcoming special legislative session, the “temporary” hike, due to sunset at the end of June, will probably be made permanent. Two lessons need to be learned from the sorry saga of the conveyance tax. The first relates to the essential dishonesty of Connecticut municipal officials. While mayors, town councilors, and selectmen claim to feel the pain of property owners who struggle with heavy tax burdens, local pols aren’t really interested in solving the problem of public-sector overspending. It’s not tax relief they seek -- it’s methods of raising revenue that don’t put their jobs (and aspirations for higher office) in jeopardy. Government-employee unions, with the tens of millions of dollars in coerced union dues they extract, are considerably more powerful than the real-estate lobby. Why risk the ire of Big Labor to please a few realtors? Besides, extra conveyance-tax cash can keep mill rates a few decimal points lower. That makes everyone happy, and helps, however slightly, get budgets passed each spring. Amazingly, the conveyance-tax hike isn’t enough for many money-grubbing municipal officials. This year, legislators considered a bill to allow local sales and income taxes. Anything, it would seem, is preferable to reforming out-of-control spending by cities and towns. The second lesson worth learning is that Connecticut’s business community shouldn’t play footsie with the state’s political class. For years, accommodationist groups -- with the always-clueless Connecticut Business & Industry Association leading the way -- have insisted that a “partnership” with government is the path to prosperity. Those tax-cutting extremists and free-market ideologues have no place in The Land of Steady Habits. Moderation is the right approach. After all, don’t career politicians want the same things as Connecticut’s hardworking entrepreneurs and families? Occasional tax hikes are “fiscally responsible,” as are the massive subsidies to government schools and economic- development strategies launched by state politicians. Trust them -- they know what they’re doing. This laughably off-base posture has helped create a state with the highest tax burden, zero private-sector job growth in the last 20 years, and a young-adult population that flees at the highest rate in the nation. If Connecticut is to have a future, its tax-hikers, hyper-regulators, and Nanny Staters need to be defeated, not placated. Businesses that hew to the old strategy of “playing ball” in Hartford are simply queuing up to be next on the fiscal firing line. Anyone who doubts this reality should ask a Connecticut realtor. The Brezhnev Doctrine had a decent run -- first announced in 1968, it survived for two decades until the communist bloc collapsed with the fall of the Berlin Wall and dissolution of the Soviet Union. If the conveyance-tax battle is any indication, the Brezhnev Doctrine of Connecticut Taxation is not only still in effect, but healthy and strong. D. Dowd Muska is a writer, commentator and public-policy researcher. He can be reached at muskacolumn@cox.net. # # # # # |
