We have been following SB1 with some interest these past few days, as it introduces some significant long term reforms to our tax system. Although the car tax portion of the bill has received more attention (here is a one pager on the issue. We like it), the really interesting part is the regional property tax sharing.
Here is what SB1 does:
A regional property tax revenue sharing system for new commercial and industrial development. Under this framework each community contributes 40 percent of the growth of its commercial and industrial property tax base after a specific year (2013 under S.B.1) to a regional pool. That is, the new property tax income is split - 60% stays in the town to cover infrastructure and traffic costs, and 40% is shared region-wide. The funds are redistributed based on a formula that takes into account a jurisdiction's population and fiscal capacity, as defined as per capita real property valuation
Why it is important for low income families:
One thing to keep in mind: right now, the poorer a city is, the higher are their property taxes. Poor cities have smaller grant lists, so they need higher mill rates to cover their costs. Higher mill rates makes them less attractive to business, as they prefer to wealthier towns with lower taxes. The less business you get in, the more you need to tax what you have, so cities end up being left behind.
Has anyone else done something similar?
Yes! A very similar law has been in operation in Minnesota with very good results. Property taxes are one of the most regressive taxes in the state, and they are set up in a way that actively penalize development and growth in our poorest cities. This reform is a very good step to reverse that.
SB1 was voted out of Planning, and it is currently sitting on the Finance committee. The bill has very strong support from the leadership, so it is likely to go to the floor, but once there things get dicier.
If you want to get involved in an effort to bring some real, long term change to the state in one of its most dysfunctional policy areas, e-mail me. This is an area where not many people are paying much attention right now, and we can make a big difference.
Of all the bizarre political celebrities of recent years, none was closer to the truth than Jimmy McMillan. In a memorable tirade in an otherwise unremarkable New York gubernatorial debate, McMillan ranted against the high cost of housing. Understandable, as he headed "The rent is too damm high party", even if it felt a bit out of place.
Remarkably, he had a point: housing in NYC is indeed really expensive, to the point of being unaffordable for most low income families. This problem, however, is not limited to New York; Connecticut, in fact, faces a similar challenge. According to a data analysis from the Working Poor Families Project (generated by Population Reference Bureau from the American Community Survey) , Connecticut has, indeed, very expensive rents and housing:
- 47% of renters in the state pay more than 30% of their income to cover rent and utilities - with the state being the 8th most expensive in the country in this regard.
- For poor and low income families, the situation is even worse. 90.3% of poor families pay more than a third of they household income in shelter expenses. 76.4% of low income families face the same challenge. Only New Jersey is even less affordable than Connecticut in this regard.
The economic effects of these numbers go beyond the hardship they inflict on low income families. Matthew Yglesias has pointed out that high housing costs work as an entry barrier for economic development, as they tend to increase the cost of doing business in the state. They are also sign, as well, that the demand for housing in Connecticut is extraordinarily high: a lot of people want to live in the state, and they are willing to pay a premium to enjoy living in quaint New England towns with excellent services, access to high paying jobs and top higher education research centers.
The takeaway, however, when thinking about this issue, is that we have the technology and resources to solve our housing crisis. It will take some effort, by we can have immediate progress in 2-3 years if we start acting now, improving access to housing for needy families, lowering the cost of doing business and attracting young professionals and families that are now being priced out of the state. We can just build more houses where there is demand for them, instead of zoning them out - not just low income housing on the inner cities, but mixed income housing on the suburbs and the nice neighborhoods of our cities as well, like East Rock or Black Rock.
Admittedly, anyone that has dealt with a zoning board knows it is not that easy, but in any case housing policy in Connecticut needs to start taking into account both the hardship it generates and the bottleneck for growth it has become. People want to live in the state; that´s why housing is expensive. We need to have more of it.