'Homestead' tax increase blunts economic development

(April 28, 2008) Faced with a weakening economy and recent job losses, Connecticut needs tax policies that encourage business investment and job creation in the state. An important part of that is finding ways to promote the development of the state’s urban centers.

But a proposal in the legislature works directly against those goals. Proponents say that SB-701, which would exempt up to the first $100,000 of most owner-occupied residential dwellings from property tax, would bring much-needed property tax reform to 18 municipalities designated as Targeted Investment Communities. This, however, is not property tax reform because it only shifts the property tax burden onto renters, car owners and businesses.

Shifting a bigger tax burden onto such entities in those municipalities will crumble prospects for greater economic development in them.

State lawmakers have continually rejected homestead exemptions because they are harmful to businesses, the communities where they are estblished and the many residents who live in those communities. Homestead exemptions discourage businesses from investing in their communities. They result in tax increases on small businesses and manufacturers, two types of businesses that can’t afford higher taxes.

Manufacturers would be particularly hard-hit because they a great deal of personal property and would likely absorb more of the shift than other types of businesses.

Rather than help matters, the net result of a homestead exemption would be to drive investment, economic development and grand list growth out of these communities, ultimately increasing taxes on homeowners, car owners and renters.

Connecticut employers this spring have been asking lawmakers to ask themselves a key question before voting on proposals: Will it help companies like theirs to succeed, or will it make it more difficult for them to survive?

With SB-701, the obvious answer is that it will make it more difficult for them to survive. And that’s a very good reason to reject this tax-increasing proposal.

For more information, contact CBIA’s Bonnie Stewart at 860-244-1925 or bonnie.stewart@cbia.com.