In living memory, Connecticut was the Gold Standard for how a state could be run for all the people from poor to middle class to wealthy. Starting in 1991 with the advent of state income tax, and increased business taxation, Connecticut started a barely noticeable decline that has accelerated dramatically in recent years.
Forbes magazine is just the latest harbinger of “for whom the Bell tolls” bad business environment rankings for Connecticut. Both sides of the aisle are just now starting to realize that growth that does not involve private investment and personal work is not real growth, it’s a debt or an obligation put off for later.
The decline is most noticeable in what we believe are 3 significant ways:
1.Transportation infrastructure including rail, mass transit, and road maintenance.
2. Softer recoveries after each recession. The 2008 recession ended with precious little recovery especially for working and middle-class jobs.
3. The larger cities which fueled Connecticut’s growth for 150 years have seen collapsing tax bases leading to financial imbalance and high taxes for those least able to afford it.
Things are coming to a head in the Nutmeg State. A huge transportation funding plan has been tossed into place, admirable on the face of it, but not very clear on the actual sources of funding. Again, the state is already stretched in the opinion of bond analysts.
As far as the recovery after the recession, the Connecticut Department of Labor attempts to put a happy face on the situation with “job loss recovered” percentages that overall are a positive that proves a negative. Tellingly, the areas of Connecticut that need the most help – the cities – are still in doldrums territory especially construction and manufacturing.
Although the adopted budget from July 1, 2015 provided for tax increases across the board and aid reductions to municipalities, threats by GE and other large corporations to leave were taken seriously and the budget is essentially on hold. Meanwhile municipalities have to shoulder the burden of the state’s performance and raise taxes on citizens.
Because UrbanTools is most concerned with urban settings, it’s natural that we try to provide options to get out from under an increasingly creaky system. From small municipalities such as Voluntown, to Connecticut’s biggest city of Bridgeport, the prime directive is to stabilize revenues and make up for disappearing state aid.
Likely the only way to do that now while avoiding debt obligations for later is tax reform that helps the town become a broad-based enterprise zone that reduces taxes on capital investment and work in favor of a broad-based tax on the publicly created values of land within municipal borders. For Connecticut, a good resource to start with is this video explaining the tax on land values and how it helps municipalities.
By the end of the year, UrbanTools expects several cities to take advantage of the land value taxation pilot program; frankly there is so little wiggle room left for the state and its citizens, this nonpartisan approach needs to be implemented for immediate study.
Revenue Impact Study of Multi-Family properties in Hartford CT: Click for PDF