Because lawmakers failed to act on the tax before the end of the regular legislative session Wednesday, a special session to deal with the issue likely will be held this summer. The municipal portion of the tax generates more than $40 million annually for towns and cities throughout the state.
Mayor Mark Boughton said Danbury could lose as much as $750,000 if the municipal portion of the tax isn't continued beyond July 1, when state sunset laws will eliminate portions that towns receive.
"We are very concerned about it, but we have every reason to believe it will be restored during the special session," Boughton said. "If not, it could be very problematic for us."
Area municipal leaders said they incorporated the expected tax revenue when determining their budgets for the coming fiscal year, based on assurances from legislative leaders that they would continue to receive their share.
Ridgefield First Selectman Rudy Marconi said his town stands to lose as much as $450,000 if the tax isn't continued.
"It would be a disaster if they remove this tax," said New Fairfield First Selectman John Hodge, noting his town could lose as much as $200,000. "At this point it's essential to towns, and ultimately it doesn't affect whether a house sells or not."
Some lawmakers say because the tax is levied on the person who sells a property, those already faced with lower values could get even less from selling their home.
"This was implemented several years ago when the real estate market was booming, and I was against it then," said state Sen. David Cappiello, R- Danbury. "Particularly with decreased values now, every dollar counts."
He said continuing the tax would essentially create a tax increase, but he wouldn't mind eliminating the state's portion to help struggling municipalities that rely on property taxes for the majority of their revenue.
"Either way, this was supposed to be a one-year tax and now it looks like it will be permanent," Cappiello said.
Deputy House Speaker Robert Godfrey, D-Danbury, said although he expects the tax will be continued beyond July during the special session, it's not something he supports.
"It has been and continues to be a bad idea," he said. "It doesn't seem good policy to me to put an extra burden on buying a house."
Contact Dirk Perrefort at firstname.lastname@example.org
or at (203) 731-3358.