With cities and towns facing cash shortages and potential layoffs in a tough economy, mayors are asking the legislature to install a regional sales tax for the first time in state history.
Although a final bill is still being crafted, lawmakers are talking about adding 1 percentage point to the 6 percent sales tax. That way, 7 percent in sales tax could be charged at the major shopping malls in Danbury and Manchester, for example, and 1 percent would go to regional organizations that would distribute the money to nearby towns.
Danbury, with a large mall near the New York border, had $4.2 billion in retail sales in 2007, while Manchester — with the Buckland Hills mall — had $3.7 billion in sales, according to state tax statistics. Those figures are in sharp contrast to the retail sales in a residential community like Coventry, a Tolland County town with about 12,000 residents and only $46 million in retail sales in 2007.
Similar retail tax plans have failed in the past when the proposals would have given the communities with the malls all of the money. Under the latest plan, the money would be shared by multiple communities through the regional planning organizations. In Hartford, that would be the Capitol Region Council of Governments, which has 29 towns as members.
During a public hearing Monday, the Connecticut Conference of Municipalities and mayors pushed the concept in front of the legislature's tax-writing finance committee. Lobbyist Gian-Carl Casa said the towns need new solutions and new approaches at a time when municipalities can no longer rely on the cash-strapped state to give them additional aid. Nationally, 23 states allow cities and towns to levy sales taxes, and Connecticut's towns need the same authority, he said.
"They need the tools to do it themselves," Casa said. "We think its time has come."
With the state's budget woes expected to increase in the 2012 fiscal year, Casa said the state needs to try new ideas that would change the Land of Steady Habits.
"The need for revenue diversity is acute," Casa said. "What you're hearing from local officials is really a cry for help."
But House Republican leader Lawrence Cafero of Norwalk rejected the idea, saying that the state and towns should be thinking about cutting spending before raising revenue. One idea would be to install a 5 percent statewide sales tax and then allow the 1 percent municipal tax to keep the overall rate at the current 6 percent.
"It's more taxes to the general public," Cafero said of the proposal. "Everything is an add-on in this place. We don't need extra taxes now. I want to hear them talking about cutting spending."
In the same way, CBIA — the Connecticut Business and Industry Association — is lobbying against the bill at the state Capitol.
"You're creating numerous new jurisdictions" for sales taxes, said Eric George, a CBIA lobbyist. "Connecticut is a difficult state to do business in now. This is not going to help. This just isn't the right answer. The first thing you need to do is create more efficiencies."
Mayors and first selectmen throughout the state, however, say they have been cutting spending for years to minimize local property tax increases. Some mayors have testified that they have cut more from their budgets — as a percentage — than the legislature has cut from the state budget in Hartford.
New Haven Mayor John DeStefano testified Monday that the municipalities have already been doing everything they can to balance their budgets in tough fiscal times. New Haven has closed two schools, cut public library hours and imposed three rounds of layoffs over the past two years to avoid property tax increases.
"The road to Connecticut's economic resurgence goes straight through our central cities," DeStefano said. "We have one tool in our tool kit — this property tax."
East Hartford Mayor Melody Currey spoke in favor of the regional sales tax, saying that she would keep the state's long-running sales-tax exemptions for food and prescription drugs. Connecticut has wiggle room on potentially increasing the sales tax because the surrounding states have higher rates. Massachusetts is at 6.25 percent, while Rhode Island's sales tax is 7 percent.
Vermont is at 6 percent, but local jurisdictions can add another percentage point.
New York's statewide rate is 4 percent, but various cities and counties can add on 5 percent more.
Rep. Vincent J. Candelora, the ranking House Republican on the finance committee, said he agreed with Rep. Patricia Widlitz, a Guilford Democrat who raised concerns about potentially pitting towns against each other.
"One size doesn't fit all," DeStefano responded. "East of the river is very different from Fairfield County. ... Right now, you've got this one choice. Right now, all we can do is drill property tax payers."
In the same way, legislators are also considering a regional hotel tax, which would allow cities and towns to divide up the additional revenue. But that idea also received a mixed response.
Chuck Moran, president of the Connecticut Lodging Association and general manager of the Courtyard By Marriott in Cromwell, said the real problem is that the state's marketing and tourism budget has been slashed sharply as part of the state's budget-cutting efforts.
"Why is the lodging industry being targeted for extra tax revenue?" Moran asked. "Adding another level of taxation will be detrimental."
Reprinted with permission of the Hartford Courant.
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