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Let Increase In Real Estate Nuisance Tax Expire

Stan Simpson

May 17, 2008

The increase to this shameless nuisance tax on real estate sales was supposed to be a temporary fix in 2003 a brief uptick to deal with a budget downturn.

Now, the legislature is taking the extraordinary measure of scheduling a special session to address whether, for the fifth consecutive year, an extension should be granted for this temporary increase to the municipal real estate conveyance tax.

The nickel-and-diming of home sellers has actually been a cash cow for municipal leaders, generating $40 million in revenue this year alone.

While the municipalities have milked, home sellers are getting bilked at the closing table. They're already losing profits because of the erosion of equity in this housing slump. And sellers' agitation is rightfully rising about an additional tax after they've already paid property taxes.

"Everyone has said to me what an unfair kind of thing this is, having to pay this tax," said Lynne Gillette, broker/owner of Gillette Real Estate in Windsor. "Do I think it's going away? No, I don't. Because the state's in such terrible trouble, they're not going to let go of any tax that exists."

But Ken Delvecchio, president of the Connecticut Association of Realtors, says support is building for home sellers.

That lawmakers during their regular session didn't take action on the extension request is telling. By June 30, if no action is taken, the municipal real estate conveyance tax reverts to the rate in 2003 0.11 percent of the sale of the home.

To stem a state cash flow problem under Gov. John Rowland in 2003, the municipal conveyance tax rate was temporarily increased from 0.11 percent to 0.25 percent of a house's sale price. As part of what was pitched to be a 15-month interim measure, major cities such as Hartford, Waterbury and Bridgeport were allowed to raise their conveyance taxes to 0.5 percent tax on home sales.

The Realtors are not looking for a rescinding of the entire conveyance tax, just a reduction to the original 0.11 percent.

Sounds reasonable to me.

"We're looking for fiscal responsibility from the municipalities in a time when people are having a hard time paying their own bills," Delvecchio said.

The conveyance tax is two-pronged: Separate from the municipal conveyance tax is a state conveyance tax that is 0.5 percent of the sale price, up to sales of $800,000. The state rate jumps to 1 percent for any home sales above $800,000.

Under the current setup, the owner of a Hartford house selling for $300,000 would be assessed a conveyance tax of $3,000. Under the 2003 format, that tax would be $1,830.

The issue pits Realtors against municipal leaders. The home marketers say the municipal leaders have been imprudent with public dollars, not willing to rescind the conveyance tax increase when the economy boomed and insisting on keeping it when the economy soured.

James Finley, executive director of the Connecticut Conference of Municipalities, counters by saying the money from the conveyance tax provides important services for municipalities. If the tax increase is rescinded, property taxes will have to be raised, cuts made, or both.

"The fact of the matter is the state never fully restored the funding that they cut in mid-year when these increased rates were first enacted," Finley said.

I don't like the concept of a "conveyance tax," let alone an increase to one. It's an extra gouge of the homeowner. In this economy, most folks are sharpening their pencils and spending less.

Municipal leaders can do the same.

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
| Last update: September 25, 2012 |
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