In January, before the state legislature started its session, municipal officials were fuming because they thought pressure from the real estate industry might cause lawmakers to roll back a tax towns rely on for revenue.
But on Wednesday, in the session's waning hours, the legislators did the opposite. They voted to allow towns to continue collecting a tax of 0.25 percent from people who sell their homes.
The tax had been scheduled to fall to 0.11 percent of the house's sale price if lawmakers didn't take action.
Using the higher rate, a person selling a home valued at $300,000 pays $750 to the municipality. Had the tax rate dropped, the tax would have been $330.
For municipalities, it means an additional $49 million a year above normal state aid to towns and cities. Danbury would have lost about $1 million a year if the tax rate had dropped; other towns would have lost between $200,000 and $500,000.
"I'll eat crow on the conveyance tax," said Newtown First Selectman Herb Rosenthal, who had previously criticized lawmakers when it appeared the tax rate would be trimmed. "I'm very pleased they voted for it. It means a lot to towns such as Newtown."
Brookfield First Selectman Jerry Murphy had been upset Tuesday with the amount of state aid coming to his town. "I'm not going to hail it as a wow. It's more of a ho-hum," he said at the time.
But with the unexpected continuation of the higher conveyance tax rate, Murphy said Thursday, "It's back to a wow."
People in the real estate industry said the tax was unfair because it applied only to people selling houses and not all residents.
They also said the legislature had promised two years ago that the higher rate would be temporary; it had been approved when state aid dropped during a state budget crisis earlier in the decade.
"The real estate conveyance tax is regressive, it is not based upon a person's ability to pay, and it hurts senior citizens and low-middle income families," Bob Fiorito, president of the Connecticut Association of Realtors, wrote in a letter asking senators to oppose the bill.
It is a regressive tax, agreed Sen. Eileen Daily, D-Westbrook, the co-chairwoman of the legislature's Finance Committee. But she said cities and towns need the money to avoid boosting property taxes even higher. She also disputed assertions that lawmakers had promised to reduce the tax by a certain date.
"When we enacted this two years ago, I never heard anyone promise anything," Daily said. "I think opponents of the tax took the (June 30) date as a promise."
The Senate rejected several amendments to the conveyance tax bill. Sen. David Cappiello, R-Danbury, proposed eliminating the property tax on cars, which town officials have said is difficult and costly to collect. The amendment would have also boosted from $350 to $500 the yearly property tax credit that Connecticut residents can take on the state income tax form.
Democrats, who control the legislature, shot down the idea.
Cappiello argued against extending the higher conveyance tax rate. "If mayors and first selectmen are afraid to stand before voters and ask for more money, why should we allow them to raise money by coming to us?" he said.
Sen. Andrew Roraback, a Goshen Republican whose district includes Brookfield and New Milford, proposed an amendment that would have kept the conveyance tax rate for municipalities at 0.25 percent, but decreased the state tax on home sellers from 0.50 percent to 0.36 percent of a house's sale price.
This amendment, too, was defeated on a party line vote, and Roraback voted against the final conveyance tax bill.
Contact Fred Lucas
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