Connecticut Talks About Municipal Sales Taxes

One of the items on my Connecticut state wishlist for quite a while has been giving towns more flexibility in revenue generation. Currently, Connecticut municipalities are limited to relying on property taxes and state grants. I’d like to see towns given the option to have more ability to vary property tax mill rates, or to draw upon sales tax or income tax piggyback revenue in lieu of property taxes.

It seems that some baby steps are being taken in that general direction in the Connecticut state legislature. From the Courant:

For years, the leaders of some of the state’s larger cities have begged the state for more money. On Monday, the Democratic mayors of New Haven, Bridgeport, Stamford and New London testified at the state Capitol that they want to charge a 7 percent sales tax, up 1 percentage point over the current statewide rate of 6 percent. That increase would translate into a 16 percent increase in taxes.[...]

“This is an easy way for you to help without having to create new state revenues,” Bridgeport Mayor Bill Finch, a former state senator, told his former colleagues. “We don’t have good choices. We need the revenues, and we need them now — not in three or four years.”

But Republican and some Democratic legislators questioned the idea, saying that retailers would not build shops in those cities and instead would develop stores in surrounding suburbs with lower sales tax rates. In addition, they said that increased sales taxes would disproportionately hurt the poor who would be shopping in the cash-strapped cities.[...]

Hartford Mayor Eddie Perez did not testify Monday, and DeStefano said that Perez wants the increase only if it is applied statewide. A higher sales tax rate could force shoppers to avoid Hartford and head to Westfarms mall on the West Hartford/Farmington line or Buckland Hills mall in Manchester.

The concerns about differences in sales taxes driving shoppers to other towns are valid, I think. But so too are concerns about how property tax rates impact the attractiveness of towns to home buyers and businesses. Whether to shift to sales taxes, or what property tax mill rates to set are necessarily influenced by competitive pressures.

I admit, sales taxes would factor into the calculus I use to determine where I shop. Already for big ticket purchases, I consider shopping in Massachusetts (one point lower sales tax) or even New Hampshire (no sales tax).

However, for a town faced with a choice of having to hike already-high property taxes, or to derive sales tax revenue from nonresidents (even if it alienates a few)…well, that’s a decision municipal leaders and town voters should be able to make for themselves.

Of course, a better answer would be to find ways to reduce spending and alleviate pressure to increase revenue…but this being Connecticut, such practicality is considered heresy.