Thursday, March 16, 2006

Perez Ties Property Tax to Income

Cities and towns across Connecticut are grappling with the realities of ever-increasing property taxes in the face of mandatory revaluation, the combination of which may become prohibitively expensive for low-income families. Hartford seems to have hit upon a way to deal with this:

Hartford Mayor Eddie A. Perez is taking a different approach by proposing to tie property taxes to a homeowner's income. Those who own and live in one-, two- and three-family properties would pay no more than 4 percent of their income on that property. (Cohen)

The idea seems to be to encourage owner-occupancy while easing property tax burdens on poor families. Here's how it might work:

Take a property in the West End now taxed on the most recent assessment - dating to 1999 - of $114,660. The owner now pays $4,701 in taxes. If Hartford conducts a revaluation this year, city officials estimate it would be assessed at about $269,000 and, under the current tax scheme, the owner would pay $8,350.

Under Perez's plan, the amount of tax depends on who owns it. If the owner lives in the house and makes $90,000 year, the tax is capped at $3,600. If the owner-occupant makes $50,000, the cap is $2,000. But if the property is owned by a landlord who lives elsewhere, the city estimates a tax bill of more than $9,500. (Cohen)

Of course, the increases would be passed on to renters in the form of rent hikes, which doesn't exactly seem fair.

It is a novel plan, and one that's sure to draw attention. Then again, it really doesn't seem like anything more than a stopgap, and an attempt to make the system a little bit more fair. The massive costs of education and social services which cause high property taxes in Hartford and other towns and cities aren't going to go away any time soon.

The plan requires the approval of the General Assembly.

Source

Cohen, Jeffrey. "Perez Tax Plan Bucks Norm." Hartford Courant 16 March, 2006.

17 comments:

stomv said...

Instead of tying it to income, why not just exempt the first $x dollars of value if it is the primary residence?

So, lets say that adequate housing in the area is worth an assessed value of $200,000. Simply exempt the first $x < $200,000 of value. Set $x == $100,000 for example.

Now, if your property is worth $100,000 you pay no tax. If it's worth $600,000 you pay tax on $500,000 of it. And so on.

This allows people who want to own a home but are living on a modest income to own a modest home. What it does not allow is for someone who is retired/trust funded/lottery winner/etc to not work at all and live in an enormous house tax free.

That seems both more fare and a more efficient way to allocate housing in a market based economy, subject, of course, to a good choice for $x.

Genghis Conn said...

I think Perez is also trying to squeeze more money out of taxpayers--which this plan would sort of do but exempting the first $x probably wouldn't.

CGG said...

Lottery winnings, trust funds, and retirement funds are all going to be taxed as income.

Anonymous said...

What Perez is really talking about is tax relief for the voting residents of Hartford. Homeownership is one of the greatest indicators of voting likelihood. He'll cut them a break for his own popularity, and have it subsidized by the renters who don't vote and will have to pay more in rent. It is an ugly, regressive way of feathering his own political nest.

mod.dem.like.jfk said...

Homeownership is one of the best ways to revitalize a city. People who live in their homes are more concenerd about their neighborhoods, their schools, and their city. This has nothing to do with rewarding voters, Perez doesn't have to worry about that despite the grumblings in one of the State Rep Districts. Perez is worried about increasing homeownership which I believe he says every chance he gets.


This plan seems to do that

Non-resident landlords, my guess would be, wouldn't care about those factors I listed above so it would seem that this is an attempt at tax equity for resident homeowners at the expense of out of town property owners. Seems fair to me.


GC- you are right, its a stop gap. When the legislature delayed revaluation a few years ago, Perez and others warned that it was worthless unless they were going to tackle property tax reform...and we all know how that is going. A stop gap seems to be the only option.

Kudos to Perez on at least trying to fix the property tax problem locally while the legislature commissions more studies.

Anonymous said...

"Non-resident landlords, my guess would be, wouldn't care about those factors I listed above so it would seem that this is an attempt at tax equity for resident homeowners at the expense of out of town property owners."

You are right, the tax bill will be sent to those out of town property owners. And they will immediately pass on the increase in cost to their renters. So the only group that really loses out is the renters, those least able to afford the increase.

Frakns said...

This is the same type of shell game as Rell's car tax dodge.

The expenses/costs to Hartford remain the same, but the taxes raised to cover those expenses/costs are spread over a different tax base.

Shifting the difference in payments under the cap to an income driven formula will only force higher income people and businesses out of a city like Hartford or shift ownership of property to shield the property owner. It would only seem to worsen Hartford's fiscal limitations.

disgruntled_republican said...

Speaking of gaps...

With his plan you are talking about a major shift in the mil rate plus it opens up too many possibilities for cheating just as many do now with income tax. I give the man credit but I don't buy into it. The exemption sounds more realistic to me and makes it impossible for anyone to cheat.

Furthermore, I can't see how it is right to tax a resident double for "house x" because he makes double of what the owner of "house y" makes. Again, I applaud him for trying to do something because it is a HUGE issue statewide but I don't see this as the answer.

TrueBlueCT said...

Is this legal? I've never heard of a property tax based upon income. (although I have heard of exemptions for the elderly.)

My first reaction to this is that it will further discourage middle and upper class people from living in Hartford. At some level, property taxes become a huge disincentive against settling in a specific town.

And I wouldn't worry about rents going up, as Hartford is part of a much bigger rental market. fwiw.

Anonymous said...

The problems with property taxes are not going to be solved until the problems with spending escalating at paces beyond the taxpayers' abilities to pay are solved. This involves the Legislature reviewing and removing the myriad of unfunded mandates, etc. it imposes on the cities and towns. Don't hold your breath!!

Anonymous said...

My first reaction to this is that it will further discourage middle and upper class people from living in Hartford.

This is a very valid concern. How will this impact the huge new crop of luxury condos going in?

Anonymous said...

they'll demand a huge state subsidy, like everything else built in Hartford...

and you wonder why taxes go up...

Anonymous said...

Who would want to live in Hartford anyway..its a hellhole....rotten schools....driveby shootings.....60% of its residents on some form of gov't assistance...

lets get real here...perez has no chance to get it passed....folks know that all he wants to do is either pick our pockets or steal our wallets...


Personally Perez ought to call a meeting and turn cank the city charter ..break up hartford into smaller units and cede it back to the state.

bluecoat said...

Which unfunded mandate? Education? Emergency services? Water Pollution Control? Blaming the out of control costs in CT on unfunded mandates sounds great but it is ludicrous.

bluecoat said...

Which unfunded mandate? Education? Emergency services? Water Pollution Control? Blaming the out of control costs in CT on unfunded mandates sounds great but it is ludicrous.

MVD said...

for more on this see CT Blue

Anonymous said...

Question here on taxes what does a person do when they are unable to pay their taxes?taxes