The Car Tax
Gov. Rell wants to get rid of it, while a chorus of municipal leaders and Democrats says that towns will actually lose money. Rell's tax cut proposal will get its first public hearing today.
Polls show public support for the idea, which includes using money from the state's two casinos to reimburse municipalities for the amount they would otherwise collect from the car taxes.
Several Democratic leaders, including House Speaker James A. Amann, D-Milford, have come out against the proposal as being unfair to certain taxpayers. At the same time, however, they have backed away from outright pledges to block the plan. (AP "Panel")
My guess is that the Democrats are waiting to see if public support for the tax cut remains high before moving one way or the other. We'll probably see some modified form of the car tax cut which keeps the $350 homeowners' credit, and finds some other source of revenue for towns.
The Estate Tax
If you have an estate worth $2 million or more, and death is raising the jewel-encrusted knocker on your front door, you're for the repeal of the estate tax. The idea here is to keep rich people in Connecticut, so they can spend money here.
Rell and others who support her plan say the state loses untold numbers of dollars in income taxes, spending and other money from wealthy residents who move elsewhere to avoid Connecticut's estate tax.
State Rep. Cameron Staples, D-New Haven, co-chairman of the General Assembly committee on state finances, revenue and bonding, says it would be "foolish to dig a trench for ourselves by cutting taxes dramatically when we're projecting deficits."
The legislature's nonpartisan fiscal analysis office is forecasting deficits of hundreds of millions of dollars in the 2008, 2009, and 2010 budget years. (AP "Plan")
I agree with Staples: we should try to plan for those deficit years as best we can. This is the price of the huge transportation plans both sides want. Republicans like this tax cut a great deal, comparing us wistfully to Florida and Arizona, but it's very unlikely that our tax rates will ever be competitive with theirs. We simply have too many services, and too much aging infrastructure in need of repair.
Besides, the Democrats will never let it out of committee anyway.
This is the easy one.
Paying local taxes on manufacturing equipment increases the burden on Connecticut's businesses as they struggle to stay competitive, John A. Salce says.
Salce, the owner of a local precision machining job shop in Plainville, said his industry is struggling with an unfair disadvantage because competitors in many other states pay no such tax.
But many municipalities worry that eliminating the tax would increase the financial strain on them. A promise of state reimbursement is suspect, they said, because the state typically reduces its payments to towns whenever its own budget runs into red ink. (Stacom)
It's very difficult to legislate economic growth. However, this seems like one of those barriers to business that just about everyone can agree on (except towns). I have a feeling it will pass quickly.
Passing the Burden On
One of the problems with all of these tax repeal proposals is that each has the potential to hurt municipalities. The solution in at least two of the cases seems to be some sort of increase in state aid: in the case of the governor's car tax plan the state will reimburse towns out of casino money, while one of the proposals for the elimination of the manufacturing equipment tax involves the state reimbursing towns out of the surplus.
In both cases, one more power of taxation has been taken from the towns and put into the hands of the state. There may come a time when the towns don't have the power to tax at all: they just decide how to divide up the money given to them by the state.
Will that be such a bad thing, in the end? I wonder.
"Panel To Hold Hearing On Rell's Car-Tax Plan." Associated Press 27 February, 2006.
"Plan to end estate tax raising class warfare concerns." Associated Press 26 February, 2006.
Stacom, Don. "Local Tax Called Unfair." Hartford Courant 27 February, 2006.