Connecticut Local Officials Defend Real Estate Conveyance Tax Increase

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The president of the Connecticut Realtors Association said allowing the tax increase to expire is about fairness in tax policy
By Gregory B. Hladky

New Haven Register, Conn.

RISMEDIA, April 7 ? (KRT) ? Connecticut big-city mayors and small-town first selectmen issued a bipartisan plea Tuesday to keep a real estate conveyance tax increase on the books, saying they desperately need the $50 million in revenue it provides.

Orange First Selectman Mitchell R. Goldblatt, a Democrat, warned that if the legislature allows the tax increase to expire June 30th the only options for municipalities would be “cuts in services or more reliance on property taxes.”

“This is not a big-city issue or a small-town issue,” said Goldblatt, whose town would lose nearly $200,000 in revenue if the current tax expires. “This affects every single town in the state.”

Arthur L. Lathrop, the Republican mayor of Norwich, called the $800,000 a year in additional revenue that his city gets from the tax “absolutely vital.” He said that amount of annual revenue is enough to pay the salaries of 16 city employees at a time when Norwich is already considering laying off 35 teachers because of reduced state aid.

Bridgeport Mayor John Fabrizi, a Democrat, said the state’s booming real estate scene is proof that the tax increase enacted in 2003 “had absolutely no impact on Connecticut’s housing market.”

But the president of the Connecticut Realtors Association, Bob Fiorito of Bristol, said allowing the tax increase to expire “is about fairness in tax policy.”

“A promise has been made” by the legislature that the real estate conveyance tax increase would be eliminated as of June 30, Fiorito said.

The increase was approved in 2003 to help solve the state’s budget crisis at the time. It was originally supposed to expire in 2004, but last year the legislature voted to extend it one year.

Conveyance taxes are paid by sellers at the time of real estate closings.

The tax is paid in two parts, state and local: The state takes a half percent on sales below $800,000 and 1 percent on sales above that level, and municipalities take a local tax of 0.25 percent on all sales.

In 2003, legislators raised municipalities’ share from 0.11 percent to 0.25 percent, or from $1.10 to $2.50 on every $1,000 of residential property. The state portion was not changed.

Also, 18 distressed cities, including New Haven, can charge a tax of up to 0.5 percent.

According to the Connecticut Association of Realtors, a seller of a $200,000 home would pay $1,000 to the state under the current law and $500 to a municipality. In a distressed municipality, the local tax would be $1,000.

The median sale price for homes in New Haven County during the last quarter of 2004 was $264,600.

Cities and towns received an estimated $35 million in 2003-2004 due to the increase in the municipal portion of the levy.

The state House chairman of the legislature’s Finance, Revenue and Bonding Committee, state Rep. Cameron Staples, D-New Haven, said he supports the municipalities’ appeal to keep the tax.

“I think we should certainly extend it,” Staples said. “In this time when municipalities are struggling we shouldn’t take this revenue option off the table for them.”

But state Sen. John McKinney of Fairfield, the second-ranking Republican leader in the Senate, said he believes the legislature “made a promise that it (the tax increase) would sunset” (end June 30) and that the promise should be kept.

Fiorito said the state’s booming housing market isn’t a good indicator of the impact the tax increase has had because “it has been masked by low interest rates.”

Copyright ? 2005, New Haven Register, Conn.

Distributed by Knight Ridder/Tribune Business News.

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