Connecticut city tries to balance budget with 5% tax on rental income – Fails

When will politicians learn efforts to increase tax revenue have a downstream effect, usually causing serious negative economic issues for the people they are trying to help?

The Democrat-controlled New Britain, Conn. City Council tried to rush through a 5 percent tax on the rental income of residential landlords. This is one of those examples of why we should all be much more involved with local politics. The city council in New Britain was working on the measure for the last few weeks, but thanks to a Twitter or Facebook campaign to notify landlords, Mayor Tim O’Brien and his administration “hit a wall of opposition” last night. (I made up the Twitter and Facebook connection, but I wouldn’t doubt it.)

The committee wasn’t planning to hear public comment because the measure went to a hearing last week. But member Carlo Carlozzi successfully argued that it had changed so much in the meantime that taxpayers deserved another chance to speak.

From the start, it was obvious that opponents would rule the discussion. They argued that hitting landlords for new revenue to balance the city’s troubled budget would just drive away investment money and ultimately pass along new expenses to tenants.

The plan was to have landlords register with the city and pay a 5 percent “license fee” based on rental income collected. The city does not seem to have the proposal posted online, and there seems to be some confusion as to if the tax would be levied on all residential landlords or only on landlords who live out-of town.

The purported reason for the new tax? The city has a blight problem and Democrats thought taxing landlords would help solve the problem while improving the budget situation for the city. Totally delusional. The tax would accelerate the blight problem and pretty much guarantee an increase in the average residential rental rate in the city by 5 percent. The costs are passed on to the renter or whomever is paying the rent.

The New Britain Herald notes…

A Common Council subcommittee voted 5-4 Monday to stop a proposed ordinance that calls on out-of-town landlords to register with the city and pay a license fee for residential rental properties.

The plan would have some landlords pay the city 5 percent of what they charge tenants for each unit, estimated to be $4 million annually.

The mayor will call a special meeting later this week to propose $10 million in proposed budget cuts, $4 million of which alderman will have to adopt to replace the revenue, said Phil Sherwood, Mayor Timothy O’Brien’s deputy chief of staff.

Sidebar: A city covering 13.4 square miles and a population of 74,000 needs a deputy chief of staff for the mayor? That means the mayor also has a chief of staff right? Anyway…

Since the Democrats could not push through the new tax, we immediately hear the threats from the politicians … right out of the playbook. My emphasis.

But, the council move, Sherwood said, leaves the mayor no choice but to put forth “a menu of (budget) cuts” that aldermen will have to choose from to make up the financial difference. aid. [sic]

“This could mean cops not getting hired to cuts in parks & recreation,” Sherwood said following the vote. “That is what this means.”

Sherwood forgot to threaten teacher layoffs, a reduction in library hours and cuts to senior services.

For reference, the New Britain budget increased 10.7 percent between 2010 and 2012. (The 2012 numbers are budget projections since the year is not completed yet.) The individual departments – in total – are looking for an 11.1 percent increase for 2013. The mayor is suggesting holding just above status quo for 2013 (really a 1.2 percent increase) and the City Council is looking for a 3.7 percent increase. Baseline budgeting brought to a city or town near you! If you are spending more money, you have not cut a damn thing.

The big bump from 2011 to 2012 was in the education budget (about $11 million) and the finance area ($6 million).

In 2011 the City of New Britain spent $205.7 million and in 2012 they will spent $224.2 million (estimate). Why not just split the difference and agree to spend $215 million in 2013?

 

14 replies
  1. Lynn
    Lynn says:

    In CT there is so much to watch, you can’t keep up. Spending everywhere with no restraint.? Every city and town and the state just needs to cut their budgets.
    ?

  2. PatRiot
    PatRiot says:

    Assumption:? Adults do not need supervision.? Reality: Steve’s post accurately proves otherwise.
    How about this:?
    1.? The combined local,state and federal taxes cannot be more than half the average annual raise of the general populous.? Then the quality of life would improve.
    2.? If the legislator’s pay?equalled the average American’s pay- A.? They would directly understand the consequence of their decisions.? B.??The average pay would go up in a hurry.

  3. JBS
    JBS says:

    Politicians (especially Democrat ones) always think higher taxes will solve all fiscal difficulties — never downsizing government!. As opponents of the tax hike rightly pointed out, any tax on out-of-town landlords would be passed along to renters and leasers. Plus, a few percents more for having to deal with a new permit, etc.
    ?
    With ‘crats, bigger government is always their solution. Always. Consider, if the rental tax had gone through, New Britain would institute a whole new bureaucracy to grant permits, keep the records, hire inspectors, yada, yada, yada. Very soon, the mayor and his platoon of aides (how many does His Importance need?) would be back bleating that MORE money was needed for . . . wash, rinse, repeat. Meanwhile, savvy landlords would avoid New Britain like the Plague.

  4. ABO (Romney/Ryan 2012)
    ABO (Romney/Ryan 2012) says:

    New Haven already does this but I believe its a flat fee per unit basis, The CTPOA (Connecticut Property Owners Alliance) http://www.ctpoa.com has been battling this tax for over a year lets face it its a revenue enhancer and has nothing to do blight.?

    Full disclosure I am affiliated with the CTPOA

  5. Eric
    Eric says:

    How can liberals be so damned ignorant? The idea that you can squeeze people until they choke, and then turn the screws just a little bit more, is absolute stupidity. ?

  6. joe_m
    joe_m says:

    “How can liberals be so damned ignorant? The idea that you can squeeze people until they choke, and then turn the screws just a little bit more, is absolute stupidity.? ”

    Because they have been doing it for years and they keep getting away with it. Tax and spend has no consequences? for the politician, so why should they change?

  7. Benjamin Less
    Benjamin Less says:

    I can’t understand why the State of Connecticut along with Governor Malloy didn’t ask Landlords in New Britain to hang a “suggestion box” outside their rental properties to offer renters the possibility to offer ideas on how to balance the State budget.? In my opinion, this is a great idea and maybe it’s the first time anyone in Connecticut has heard such a suggestion.
    ?
    What do you all think about this?? Great ain’t it?

  8. Gary J
    Gary J says:

    ?Were these people born stupid, or did they go to collage to become that way? They really thought the landlords were going to pay this fee and not put it right on the backs of people paying rent trying to make ends meet?? OMG it’s worse than I thought.

  9. Tim-in-Alabama
    Tim-in-Alabama says:

    Looks like the Bain Capital, Tea Party, Christian, heterosexual, European-American, pick-up truck driving slum lords have won this time.

  10. yeah
    yeah says:

    1) as if this isnt going to get passed along to renters, with rants already going up w/ supply & demand, mortgages arent as easily obtained any longer…
    2) its going to lead to more vacant properties, which equals less taxpayers…
    ?
    lose/lose, sounds like we’ve got a winner!!! ding ding ding!

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