One check goes to the state, the other to your local government. Some state lawmakers want to chop that second one roughly in half. That would seem like a good deal for taxpayers, who would save more than $400 on the sale of a $300,000 house.
But local officials say it's a lousy deal. They say the real estate conveyance tax helps pay for schools, roads and other programs. A lower tax rate would cost Danbury area towns millions of dollars a year, according to mayors and first selectmen.
The debate has taken an ugly turn.
No longer just a policy dispute, it's turned into an edgy discussion of the influence of money in politics. To put it bluntly, some local officials say state lawmakers are essentially being bought off by campaign contributions from the real estate industry, which opposes the higher tax.
"This (tax reduction) is only to satisfy the real estate lobbyists," said Ridgefield First Selectman Rudy Marconi, a Democrat. "I'd rather not think this way with the state ethics, but we heard not one legitimate reason to take this away."
Ridgefield stands to lose about $650,000 a year. Danbury stands to lose more than $1 million.
A conveyance tax cut is "is important to the real estate industry, not the taxpayers," said Danbury Mayor Mark Boughton, a Republican. "That's who (state lawmakers) are concerned about."
Last week, the legislature's Finance, Revenue and Bonding Committee voted against the tax rate, but the debate is not over.
A number of lawmakers in both parties call the conveyance tax unfair to consumers and to the real estate industry. They said they promised two years ago the higher rate would be temporary.
The Realtors Political Action Committee - an arm of the Connecticut Association of Realtors - contributed $93,833 to state legislative candidates during the 2004 campaign.
State Sen. David Cappiello got $1,000 from the PAC. The Danbury Republican also received $797 from individual Realtors, according to campaign finance records filed with the Secretary of the State's Office.
Like others, Cappiello bristles at any suggestion his vote is for sale. He said, for example, he accepts contributions from trial lawyers, but he supports medical malpractice insurance reforms that would limit jury awards - and thus, legal fees.
"Have you ever known me to support a tax increase?" Cappiello said. "I am proud of my support for the Realtors."
So what's all the fuss about?
Both the state and your hometown make money when you sell your house. The state rate is one-half percent of the sale price, or about $1,500 on a $300,000 home. There is no talk of changing that rate.
The local tax was 0.11 percent of the sales price until 2003. That year, the state had a huge budget crunch and lawmakers trimmed aid to cities and towns. To compensate, they boosted the local portion of the real estate conveyance tax to 0.25 percent.
At 0.25 percent, the person selling a $300,000 home would pay $750. At 0.11 percent, the levy is $330.
When legislators raised the local conveyance tax, they also said the higher rate would disappear (or "sunset," in government jargon) on June 30, 2004 unless lawmakers voted to extend it. Extend it they did, until June 30, 2005.
That set up this year's battle.
Mayors and first selectmen came to Hartford this month to lobby for the higher rate. Cities and towns reaped nearly $50 million in added revenue over the past two years with the higher rate, according to the legislature's Office of Fiscal Analysis.
Local officials argue there is no logical reason to cut the conveyance tax at the same time the state is looking to close a budget gap and raise taxes on cigarettes, alcohol and gasoline.
On the other side is the real estate industry, which says the state is breaking its promise that the higher rate would be temporary.
Robert Sulliman of New Milford, a RE/MAX real estate agent in Danbury, said legislators who "didn't honor their commitment are public enemy number one of the Realtors."
"It's a discriminatory tax because it taxes one product," Sulliman said. "It would be like taxing Coke instead of Pepsi."
Republican Gov. M. Jodi Rell says she has not decided whether she would oppose extending the tax.
Rep. Cameron Staples, D-New Haven, co-chairman of the Finance, Revenue and Bonding Committee, supports the current rate. "The towns have become reliant on revenue from the real estate tax and times are tight now," he said. "Just because the first tax was not permanent doesn't mean it can never be permanent."
But Rep. Robert Godfrey, D Danbury, said it was "imprudent" for municipalities to start counting on added revenue local officials knew was temporary.
Godfrey, who received $500 from the Realtors PAC, said he understands the frustration of city and town officials.
"They're desperate for revenue. They're stuck with an antiquated, unfair property tax system," Godfrey said. "But this is not even a Band-Aid approach."
Godfrey said the higher tax penalizes home sellers. "What about senior citizens trying to sell their homes? It's just not fair."
Rep. John Frey, R Ridgefield, himself a Realtor, got $500 from the Realtors PAC for his 2004 campaign, as well as $2,375 in donations from individuals in the real estate industry, according to state records. Frey said he would oppose the conveyance tax even if he didn't have ties to the real estate industry.
The higher rate "was sold with a deadline that has not been honored twice," Frey said. "Whether it helps or hurts the real estate industry is beside the point. Today, they're looking at homeowners. Who's next? It's a matter of fairness."
But if fairness is the issue, Redding First Selectman Natalie Ketchum wants to know why the state doesn't dump its 0.50 percent conveyance tax. Redding could lose $150,000 a year if the local tax rate drops back to 0.11 percent.
"There is no question the real estate industry has a presence in Hartford," said Ketchum, chairwoman of the Housatonic Valley Council of Elected Officials. "Their objections have been misguided. The legislature made the promise (the higher rate) would be temporary because of fears the real estate industry would suffer. The housing market has been booming across the state."
According to the Connecticut Association of Realtors, 9,254 housing units were sold in the first quarter of 2003 before the tax was in place. In the last quarter of 2004, 14,000 units were sold.
Association president Bob Fiarito agreed the higher tax hasn't hurt sales. "Sales have been strong for three years. The basic philosophy is bad tax policy. Taxes should be broad-based and fair."
He makes no apologies for his association's lobbying effort aimed at cutting the tax. He said his organization is engaged in the political process the same as any other group.
"I don't think we wield that much power," he said. "There is a broad coalition against this tax, including the AARP. Some elderly people wonder if the state is going to tax their home equity, that could mean their IRA or 401K could be taxed next. It's a credit to the Realtors that we have made a lot of people aware of this issue."
But Common Cause of Connecticut, a watchdog group that monitors money in politics, said while campaign donations may not sway lawmakers' votes, the money casts doubt on why politicians vote the way they do.
Executive director Andy Sauer called the $93,000 in 2004 campaign contributions from the state Realtors PAC a "substantial amount."
"A lot of money can be used to curry favor and, at a minimum, access," Sauer said.
The real estate industry isn't alone in its lobbying. The Connecticut Conference of Municipalities, which represents cities and towns, says the increased tax on home sales allows the municipalities to avoid large property tax hikes.
CCM spokesman Kevin Maloney said although his group doesn't have a political action committee that doles out campaign contributions, it is lobbying hard to keep the current tax rate.
"Certainly, money talks," Maloney said, referring to the real estate industry's efforts. "We depend more on our relationship with state and local governments."
Sen. John McKinney, a Fairfield Republican whose district includes Newtown, scoffed at the idea that he would be unduly influenced by either side.
McKinney, who got $1,000 from the Realtors PAC in his last campaign, wants to reduce the conveyance tax.
"My record to keep taxes low across the board has been strong," McKinney said. "The truth is that CCM, they do a lot of good things, but they have more paid lobbyists in Hartford than the real estate industry."
Contact Fred Lucas
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