The property tax system's deep unfairness: The words of a Stonington resident.

I recently received an e-mail message from a resident of Stonington expressing concern about the deep flaws and unfairness of the property tax system and how it affects him. I think that he raises excellent points. And what he says is particularly important, because it shows that this is a statewide problem - and not just a problem for people who live in central cities like New Britain or inner-ring suburbs like Newington. Reform is needed for the state, as whole.

Here is his message to me...

Dear Rep. O'Brien: This note to you concerns the proposed property tax relief bills in regards to senior citizens. I have tried to follow the various proposals being offered and still do not understand how any will benefit me. In my case, I am 64 years old and retired from government service at the Naval Submarine Base, in December 1997. I purchased my waterfront home in Mystic, CT in 1979 for $86,000. Being single, I happily (dutifully) paid my property taxes to the Town of Stonington, knowing the Town needs funds to operate. Also included in my taxes were ever increasing monies for education costs, even though I had no children. I again paid these taxes so that Stonington schoolchildren would be well educated. So for nearly 20 years, I have contributed to the welfare of my town while earning a lower middle class income of nearly $40,000 and for the remaining 10 years at a retirement income of slightly over $20,000. The value of my house (purchased at $86,000) rose to $376,000 (two revaluations ago) and to $771,000, at the last revaluation (five years ago). We are now going through another revaluation and God only knows what they will value my home at this time. I might add that these values are SUBJECTIVE and not necessarily it’s true value. This could only factually be determined once it was sold. This may become a fact when I receive the new value, that being I most likely will have to sell my home. My taxes now stand at $8,500 a year. Add insurance, mortgage and utility costs and you get close to my annual income, never mind food, clothes, gas for the car, medical bills, etc. I have to ask…is it fair to penalize a citizen who has paid his fair share of the town’s costs for 30 years and now that he is on a fixed income, to be forced out of his home because of the ever increasing property taxes??? Certainly, there can be some assistance to us seniors in our present financial positions. After all, everyone, lucky to live long enough to arrive at their golden years, will be in the same boat, so why can’t some permanent, state-wide program be implemented to freeze senior’s property taxes (based on their actual income) at some designated amount. I realize some of the state’s seniors may be more “well-off” than others and may not need tax relief…or as much. That is why tax relief should be based on their “actual income”. I realize both parties are trying to come up with some meaningful legislation and I appreciate your efforts. However, giving me $500 or $1000 credit on my state income tax doesn’t help me and many, many, others, who don’t earn enough to even pay income tax. Our main area of crisis is the “actual property tax”. I remember not too long ago, grass roots groups were trying to get the assessments moved back to an earlier year and not raise a senior’s assessment until the house was sold, thereby fixing an actual value to the property. This makes so much sense that I wonder why this method is not being enacted. Again, I appreciate your efforts and sincerely hope you can pass some meaningful legislation that will allow us seniors on FIXED incomes, to stay in our homes. If not done in this session, I may very well be gone by the next! Thank you

I thank him for his comments, since responding to him gave me the opportunity to put down in writing some things that are important to me about this issue. Here (with some minor corrections) is what I wrote back...

Thanks so much for your e-mail.

You summarized very well the most severe problems of the property tax system. Unfortunately, of course, it is because you are experiencing them directly.

Even though your income is not high enough for you to even owe state income taxes, you, by the numbers you gave me, pay upwards of 40% of your income in property taxes.

There is a State Senator who continually claims that people in your income range "pay no taxes". But you know from experience that this is not true. There is a lot of talk about the concern of people losing their homes through eminent domain, but far more people lose their homes because of the property tax system. I find it unfortunate that many legislators' response when I bring up the very problems that you are experience answer that many seniors should not be living at home alone, anyway. But they are wrong. You are being treated unfairly.

The thing that most deeply offends me is unfairness. You should not have to give up your home because you cannot afford the property taxes. In fact, it offends me that our state's tax system charges you many times the effective tax rate that people much wealthier than you pay.

Since you contacted me, I assume that you have seen my property tax reform page on my state website...
http://www.cga.ct.gov/hdo/fp/024/proptaxref.htm

This web page has a summary of the property tax reform plan that I wrote a few years ago. This proposal is designed to do exactly what you suggest - making the property tax system fairer by making it depend more on what your income actually is. The plan looks complicated until you apply it. It gives you a credit that lowers your property taxes by 3/4 of the difference between your pre-credit property taxes and your income taxes.

So for you, that would mean that your property taxes would be cut by $6,375 ($8,500-$0=$8,500; $8,500x3/4=$6375). That would lower your property taxes to $2,125.

I estimate that upwards of 75% of people in the state would pay lower total taxes under than plan, and seniors with lower incomes would be especially helped.

The state Property Tax Credit is an attempt to do something similar, and it pre-dates me being in the legislature. I have offered suggestions to use the structure of the Property Tax Credit for much more substantial property tax reform. First of all, if everyone's Property Tax Credit were based on the formula in the plan I wrote, that would target the tax relief to the people, like you, who really deserve the help the most.

Second, and much more important, we would need to make the Property Tax Credit refundable. This means that, even if, like you, your income is too low to owe state income taxes, you could still file a state tax form and you would get a refund equal to the amount of the Property Tax Credit. So, if the Property Tax Credit were $1,000, you would be able to get a refund of $1,000. If we went the step further and made the Property Tax Credit more based on actual income and property tax burden, you would get $6,300 back from the state.

The legislature actually proposed this (making the, then $500, Property Tax Credit refundable) in the last term, but the governor completely refused to consider it. This refundability proposal is not in the current plan proposed by the legislature, but I will continue to press for it.

If we were to have a refundable Property Tax Credit that was much more based on income and actual property tax burden, we could go the step further by allowing taxpayers to check a box on their state tax form that would make it so that the tax credit would apply to their next property tax bill. So, instead of paying property taxes and then getting a refund back from the state, taxpayers would simply have a cut in their property taxes.

Anyway, I thank you very much for your message. This is a very important issue for me. Hopefully, we can win real action that can move the state toward a system that is truly fair.

By the way, would you mind if I include your message and my response to you on my blog? I would not include your name or e-mail address, of course. But I think that the point needs to be made that there are people in towns like your's who are hurting under the property tax system, in addition to the city and town that I represent.

I hope you are having a great Memorial Day weekend!

He wrote back...

Rep. Tim O'Brien: I really appreciate your comprehensive answer to my e-mail. I was almost getting chills reading it as it addressed all of my concerns. I sincerely hope you continue the fight in the legislature to make the tax rate fair for those of us who have paid our fair share of taxes for all of our working years. I realize this session is winding down but I hope some plan for relief will pass. Since I have one more year before the axe falls concerning me staying in my home, I hope a plan such as yours can make it all the way through next year. I really do thank you for your efforts and for letting me know what you have been doing to help us "older folks". By all means, please use my letter as you wish.

It is the real story like this gentleman that makes me want to continue fighting so hard on the issue of property tax reform. My thanks go to him for the points he made. And I hope that we can make real progress before it is too late for him.

Of course, property tax refundability - which is the thing that would really help him - is not in any budget being considered at the Capitol this year. The Democratic budget is so good in so many ways - especially in making the state's tax systems fairer - that it might seem tough to consider adding this to the budget debate. But this was a Democratic proposal in the past, so I will ask the Democratic leaders to push for this in their budget negotiation with the Governor.

The Governor outright rejected this idea in the past, but it is the most effective way that has been seriously considered at the Capitol for providing real relief and fairness for senior citizens like this gentleman.

It is just the right thing to do.