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Senate Bill 1 was approved Wednesday by the General Assembly’s Finance, Revenue and Bonding Committee. Under the new bill, towns and cities in Connecticut would see a new source of revenue besides property tax in the form of state sales tax. Senate Bill 1 would have 0.5 percent of state sales tax be dedicated exclusively to municipalities or regions beginning Oct. 1.
Of the resulting revenue, 90 percent would be distributed directly to towns, and 10 percent would be distributed to Councils of Government to support regional services. A new “soft cap” on municipal spending would be introduced to ensure the revenues are spent responsibly. If a town increases its budget by more than 2.5 percent or the rate of inflation (whichever is greater), its sales tax revenue would be reduced accordingly.
“This is great news for cities and towns like Norwalk and Darien,” said Duff. “The sales tax-sharing formulas will boost municipal budgets, maintaining service levels and keeping hard-earned tax dollars in the pockets of taxpayers. Under this plan, Norwalk will receive an additional $9 million in aid and Darien will receive an additional $900,000.”
The state would also provide greater level of PILOT aid to towns and cities with the highest levels of state-mandated tax exempt properties. This would aim to reduce the burden of towns with tax exempt properties, which currently must tax remaining properties at higher levels to make up the difference.
The bill would also seek to reform the car tax by establishing a permanent cap on car tax in all towns at 29.36 mills. According to Duff, taxpayers in Hartford pay more than six times the tax as a Greenwich resident on identical cars. This new measure would cut property taxes in half for taxpayers with the highest mill rates, Duff said, and provide direct tax cuts for taxpayers in more than 70 towns.
The bill includes a voluntary revenue sharing option to promote regional planning. Member towns of Councils of Government could share up to 20 percent of property tax revenues on new commercial and industrial development.
The bill was sponsored by Duff and Senate President Martin Looney (D-New Haven).
“This bill will result in quantifiable tax relief for Connecticut’s families and small businesses,” said Looney. “Senate Bill 1 represents the largest overhaul of our property tax, car tax and Payment in Lieu of Taxes system in our history. It provides new revenues to cities and towns while at the same time slowing municipal property tax growth. Finally, it facilitates regional economic development planning instead of pitting towns against each other.”
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