In Defense of the Property Tax

June 12, 2008

Joran van der Sloot, “Big Oil,” and the government of Myanmar all have serious PR problems, but none would likely switch places with Connecticut’s property tax.

The primary tool cities and towns use to raise revenue is despised by taxpayers, who according to opinion surveys, consider it “unfair.” Nutmeg State elites loathe the levy even more, blaming municipalities’ “overreliance” on it for “sprawl,” traffic congestion, and “inadequately” funded government schools.

With many local fiscal fights still raging -- over 30 budget referenda were rejected in the first round of voting this spring -- Connecticut’s property tax is taking more than its usual share of beatings. When voters say no to tax-hiking budgets, municipal officials parrot state legislators’ claim that the property-tax system itself is somehow to blame for cities’ and towns’ fiscal troubles.

Pols’ posturing aside, the property tax is not an ogre. In fact, under many measures of fiscal soundness, it scores quite well.

Take transparency, a tax principle both the left and right agree is important. The American Institute of Certified Public Accountants describes it as “the basic notion that taxpayers should know … (1) that a tax exists; and, 2) how and when the tax is imposed on them and others.” A 2006 report by the Connecticut General Assembly’s Program Review and Investigations Committee concluded: “Nearly all aspects of the property tax are transparent. Taxpayers know the amount, frequency, and purpose of this tax. The assessment process is open, as anyone can compare the value of a neighbor’s or similar property, and the option to appeal is available.”

Compliance is another principle tax wonks value. “Taxpayer compliance with the property tax is straightforward,” the committee’s researchers found. “In Connecticut, the property tax collection rate for 2003 was 97.8 percent and is typically the highest rate of all taxes. It is the only tax where the government computes the value of the asset (and base) and the tax due. Unlike the income tax, the tax bill does not require the completion of forms; it is generated automatically and does not require the assistance of an accountant.”

Stability is also a desirable attribute, and taxing property produces a predictable and consistent flow of funds. Unlike levies placed on revenue sources with values that can swing wildly -- e.g., capital gains, corporate profits, or even personal income -- its base doesn’t change quickly. Not surprisingly, the legislature’s study called the property tax “the most stable and reliable” of all of Connecticut’s major revenue-raising mechanisms.

So if the property tax is transparent, stable, and promotes compliance, why does it have such a bad reputation? There’s a simple answer: Since municipalities won’t control their spending, the property-tax burden is out of control.

Between 1986 and 2006, municipal expenditures in Connecticut rose by an inflation-adjusted 71 percent. (Population growth was only 9 percent.) The share of local budgets covered by state and federal subsidies didn’t increase much during that period, so all that additional spending hit taxpayers at the local level. Connecticut now suffers nearly the highest property-tax burden on owner-occupied housing in the nation. And with most Nutmeg State households experiencing stagnant or even declining real incomes during those two decades, it’s not difficult to understand why more voters are casting “no” ballots.

In a deft maneuver, Connecticut’s left has harnessed rage about runaway municipal spending/taxes to lobby for their favorite causes, including higher income-tax rates for the “rich,” draconian land-use controls, urban “revitalization,” and expensive new programs for government schools. (Unfortunately, several Connecticut taxpayer activists, well-intentioned but deeply misguided, assail the property tax with arguments generated by liberals.) Local officials have joined the chorus, agreeing with the Big Government lobby that solving the property-tax crisis requires greater state subsidies and local-option taxes.

Don’t believe the hype. Whether it’s a left-wing activist or a frustrated pol from either political party, in Connecticut, property-tax “reform” is simply a means to avoid making tough but necessary decisions to eliminate programs, right-size salaries and benefits, and lay off public employees. “Retire the Property Tax,” an editorial by former Madison library official John Brady The New York Times ran in December, is illustrative. The “most important” reason to junk the property tax in favor of a municipal income tax, Brady averred, was to “generate enough revenue to meet our town’s growing needs.”

Connecticut’s property tax should be celebrated, not scorned. There’s nothing wrong with it that spending restraint can’t fix -- and that’s why so many in Connecticut government would rather attack the property tax’s existence than the true causes of its crushing burden.

D. Dowd Muska is a writer, commentator and public-policy researcher. His website is www.dowdmuska.com.

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