Thirteen men and Mary Glassman!

Last Updated on Monday, 26 April 2010 12:31 Written by John Hartwell Saturday, 24 April 2010 12:37

Democracy for America – Fairfield County presents:

(Note: Below this article on Mary Glassman you'll find the first in our three part series on tax reform in Connecticut. Property taxes are the third highest in the nation and are causing widespread loss of both residents and jobs in the state. In these articles Professor Fred Carstenson presents some practical solutions.)

4^th in a series of interviews with prospective gubernatorial candidates

Democratic Candidate for Governor of Connecticut

Mary Glassman – A Woman Among Men

Mary Glassman is running for Democratic Governor of Connecticut and the fact that thirteen men are running against her doesn’t trouble her one bit!  At the recent Democracy for America –Fairfield County April MeetUp in Norwalk Ms. Glassman was asked how she came to her decision to run.  She said she asked herself  “What am I looking for in a Governor? I’m looking for a different voice. I’m looking for a steady, substantial candidate who will be honest about what can – and cannot - be achieved.  I don’t want to find out I’ve voted for someone who goes back on their word and doesn’t change the rules halfway. I want intelligent, sustainable and long-term government planning.  I want someone who has proven experience in government and who is willing to be innovative and involved in the everyday lives of Connecticut citizens.  And I think that candidate is me!”

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Born and raised in New Britain, Connecticut where the promise of a good school, an affordable college education, a solid middle class job and a decent retirement was an achievable goal, Mary feels that today those opportunities are slipping away from far too many families and that is why she has decided to run for Governor of Connecticut. She told the audience that Connecticut has not moved with the times and is falling far behind most states in its efforts to improve its economy, its business practices, and its taxation laws. She stated that there is no time to lose if we are to begin reversing the fiscal and administrative shambles in which Connecticut now finds itself. 

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As four-term First Selectman of the suburban town of Simsbury, Mary has been a strong and successful Democratic leader in a town full of Republicans. She is the first Democrat to be elected to that office in forty years and noted that when she ran in the primary for Lieutenant –Governor with Dan Malloy in 2006 she received 57% of the vote

 

Simsbury, like most towns and cities in Connecticut, faces the same financial difficulties that both the state and the nation must now address - sprawl, transportation, joblessness, unsustainably high healthcare costs and funding for education. 

Already an experienced legislator on many levels, Mary observed that she has worked in the State Capitol with the state’s top officials for many years in addition to clerking for the judges of the Superior Court and as an advocate for CT Voices for Children.

Mary is proud of being the first in Connecticut to organize a charrette (community design session) on how to improve Simsbury’s downtown area. The result was 800 people participating over the course of five days during September of 2009 and coming up with a viable mixed-use plan for the center of town. This mixed use formula has been used with great success in many other states.  These examples of local leadership demonstrate that, in many areas, local government gets it right and the state can follow the innovation and initiative local towns demonstrate.

 Speaking of the state’s fiscal problems Mary noted that because most of the reserves that Connecticut has maintained to achieve its high bond rating are depleted, it is much more likely that this bond rating will be downgraded – meaning that loans to State and local governments will be far more difficult to obtain than they already are. The present budget “plugs” are actually stealing from the future and will result in ever more financial instability. 

What is essential, Mary noted, is to promote better communication, programs and incentives for towns that would encourage them to cooperate in a way that would make the most economical and effective use of limited funds.

 Some other issues Mary addressed were:

 Along with some of the highest property taxes in the country we also have the highest electric costs and increasingly, people cannot afford to live here. As people move the tax burden falls ever more heavily on the remaining taxpayers.  As revenue decreases Hartford is faced with two choices - increase taxes or reduce services.

 Unlike Connecticut, many other states are investing in smart, disciplined programs to encourage business to come to their towns and cities by providing a workforce educated for specific businesses, tax benefits, workforce housing and other incentives – whatever it takes!.

Connecticut, which produces some of the best educated young people in the country, fails to amortize on this because it doesn’t provide incentives for business to stay in the state.  For example, Connecticut turns out the very best product in biotechnology and medical research but makes no effort on to connect the business community to the commercial jobs that result from the research and they are, therefore being outsourced to other states and countries. 

 Many of these problems could be resolved by promoting greater regional cooperation between towns and cities.  Mary told the audience that sharing and coordinating some public services and public works projects makes practical, financial and political sense. Reviewing old budgets and contracts could also provide savings. For example, a police contract that says there will be no layoffs all the way out to 2017 is not realistic in the current financial environment.

 In another example, Mary said, the town of Simsbury would pave a road up to the line in the town of Avon and then, week later, the town of Avon would pave the road up to the Simsbury line and it is this kind of disjointed process that needs to be addressed at every level of administration. “If the two towns had communicated on the road paving project and worked on it jointly obviously it would have saved taxpayers a great deal of money.

 Traffic congestion along I-95 and I-84 is one of Connecticut’s major problems. These main arteries are among the most travelled roads in the country and the state needs to adopt a more comprehensive and aggressive strategy for its entire transportation system when competing for federal funds to improve this vital and disintegrating part of our infrastructure.

The Connecticut gas tax has been used for it designated purpose of transportation maintenance but used-up in stop-gap measures to plug holes in the budget.  There is a plan in place for its proper implementation however, this has been sidelined and the result is further deterioration of the transport infrastructure.

 In the area of health and special education Mary said she would take a different approach, again, consolidating resources in order to provide better care at a lower cost.  As an advocate for children and teens she noted that the teen occupancy in state prisons is among the highest in the nation and that putting young non-violent offenders into the prison system not only costs the state but fails, in general, to produce useful citizens.

 From instituting an internet sales tax to revisiting the Connecticut road tolls or investing in open space, Mary said that as Governor she will look personally at every line and aspect of the budget for reasonable ways to cut costs, increase efficiency and make this state one of the best places to live, work and do business.

 You can find out more about Mary Glassman at http://www.maryforct.com/

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How to bring Connecticut’s 19th Century fiscal policy into the 21st Century 

First in a three part series by: 

PROFESSOR FRED CARSTENSEN 

Director, Connecticut Center of Economic Analysis 

# 1 – Property Taxes are Regressive  

Professor Carstensen described the Connecticut state tax structure as a relatively simple one. There is a progressive income tax, a use tax, and a sales tax. While the state uses some revenue to fund public education in a program called Educational Cost Sharing, local property taxes fund K–12 public education which dominates municipal budgets. 

In Connecticut, the property tax burden exceeds the national average, being the third highest in the nation per capita and tenth highest in percentage of personal income. 

When dealing with real estate, property taxes constitute two taxes that differ in their effects and their incentives.  For example: in dispersed towns like Greenwich and Darien, land values are a high percent of total property value as opposed to Hartford or Bridgeport, where buildings comprise most of the property value. These two parts of property tax appear to be inseparable under Connecticut law, but they have opposing effects on the tax structure. 

The state ranks second highest in the northeast and fourth in the country in regard to commercial property tax.  The property tax burden for businesses in Connecticut is above the national average (fifth highest in the Northeast, seventeenth highest in the nation), and for non-corporate businesses, it is nearly four times greater than that of corporations ($1.6 billion as opposed to $445 million). These factors strongly discourage commercial investment – and in consequence job growth in the state – and, without a strong commercial and industrial tax base, property taxes spiral upwards. 

Because Connecticut relies largely on property taxes to fund municipal services there are gross inequities in the cost of living from one town to the next, resulting in sprawl in some communities, while others search for taxable property. 

Professor Carstensen’s data demonstrate that taxing land, rather than building values is a more efficient way of producing municipal revenue, because it encourages the private sector to concentrate prime property for intensive use, leaving land distanced from transportation hubs in green spaces. 

Municipal budgets often lack tax revenue to off-set the increased cost of infrastructure. In towns, zoning policies favor single family dwellings on large residential lots and discourage the building of multi-dwellings on smaller-sized lots which would lower infrastructure costs per unit. 

In some towns, such as Greenwich , where large lots represent 70% or 80% of the value of a typical home, the tax policy encourages redevelopment.  For example: A large portion of Greenwich 's residential sales result in tearing down homes which almost anywhere else would be considered mansions!  Unlike property values, land value continues to appreciate year after year.  The opposite is true in highly concentrated cities where land values are low relative to building values, and where the property tax puts a high burden on buildings.  This is where there would be the largest benefit to be gained from tax reform. A higher land tax, and a lower building tax would tend to concentrate dwellings and offices, which is better for transportation, utilities and services, and is less polluting. 

Connecticut could benefit from the example of other states by permitting municipalities to separate mill rates on land from mill rates on buildings.  For example: if towns and cities like Stamford, Bridgeport, or Hartford, were to reduce the mill rate on buildings a mere 15% but increase the mill rate on land value so as to remain revenue neutral, the tax burden would be reduced on residents of less choice neighborhoods and from commercial properties who have developed their properties to a higher standard and better use. 

An equitable tax is one which treats equals similarly and is based on ability to pay. The property tax fails this test because taxpayers in similar financial situations often pay varying property taxes based on their municipality of residence. In particular, seniors and other fixed-income taxpayers often pay a much higher percentage of their income than other taxpayers. Shifting property tax to a more progressive state revenue source in order to fund local public services, particularly K-12 public education, would alleviate and equalize the state tax burden.

The value of land increases proportional to population. That’s why farmland is relatively cheap. As the population increases, so does the value of occupied land. Taxing land at a higher rate than the buildings on it is a far more efficient, effective and equitable method of taxation because it does not unfairly penalize those who make the most efficient use of that land and bring more benefits to the community.  Large, sparsely developed lots would pay commensurately more in taxes. 

As an example of property tax inequity, a 4+ acre lot in the center of downtown Stamford has been a vacant decades. The carrying costs for this piece of property (which drags down the value of surrounding property) are minimal because the undeveloped land is not equitably taxed and the cost to the out-of-town owners is minimal.  Right across the street, the Town Center and the Marriot provide jobs, parking, and bring business into the community, yet they are taxed on the benefits they bring to the community while the unused property actually costs the taxpayer in the form of police protection, water and sewer supplies etc. If its taxes were raised, the owners would be motivated to either develop it-- which would benefit the entire community-- or to lower its price so that it would be appealing a developer. 

Over reliance on property taxes also significantly contributes to sprawl, because municipalities tend to use their zoning laws to increase revenue and limit services. As taxes increase, service capacity decreases causing cities, older suburbs and rural communities with small and shrinking tax bases to suffer economic blight. The property tax is regressive and our legislators would do well to re-evaluate how the tax is applied to Connecticut citizens. 

A Note on Sales Taxes

As a general principal, Professor Carstenson said, sales taxes should be low and widespread, but in Connecticut the sales tax structure is complicated.  There is no tax on most foods, and any piece of clothing up to $75 is also untaxed. Almost everything else that is sold is taxed at 6 ½ %.

By actually lowering taxes to 3 ½ % but extending that tax to cover all goods (including food and clothing) at that lower rate the State would actually improve its tax revenue.  Doesn’t sound logical, does it? 

But here’s how Professor Carsetensen says this would work.  Every taxpayer in Connecticut, rich or poor, would get a tax rebate based on the average taxes they would have paid for food and clothing that year.  For example: if it costs an average family of four about $350 a year paid in taxes for food and clothing everyone in the state would get a rebate check for that amount.  But wouldn’t that be another regressive tax? 

Actually, no. Those people who actually shop at high end grocery and clothing stores pay a premium for what they buy – in effect they pay more for a pound of cheese at Whole Foods than they would at say Stop and Shop.  So, although the high end shoppers may get back that same $350 it would still not cover all the taxes they have actually paid for their groceries because they pay more for the same amount of food (or clothing.)  Thus, the state gets to keep that extra money and it is coming from those who can most afford to pay.  The people buying lower priced groceries and clothing would recover the entire costs of their tax expenditure on those items. 

An added advantage here is that tourists and other temporary residents would also be paying the food and clothing taxes but would not be receiving any refunds from the state.  This is something to think about because Connecticut sustains a lot of ‘just passing through’ traffic – another thing to think about while waiting on the I-95 parking lot!  As a final benefit, if the state sales tax were to be simplified in this manner it would be much easier to charge sales tax (as many other states do) for Internet sales. Again, another source of revenue that remains untapped by the state to this day. 

Professor Carstensen concluded by saying that Connecticut should gauge its spending and/or institutional restraints against the patterns in neighboring states and employ tax-incidence analysis as a strategy. This would permit the state to construct tax policy in ways that minimize actual burdens through recognition of the interdependence of state and local taxes and federal rules, and reduce inequalities at the local level. Such inequalities generate significant negative impacts that now put the state at a competitive disadvantage.

 Part II coming soon: It’s all about jobs! 

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