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More Taxes, More Regulations and School Regionalization

Solving Housing Crisis with Regulations That Don’t Work 

The Housing, Planning and Development and Insurance and Real Estate Committees held an informational forum Tuesday where they heard from a panel of economic experts about trends in the housing and real estate market with a focus on production and affordability. 

Dr. Robert Dietz, Senior Vice President for Economics and Housing Policy for the National Association of Home Builders, provided the committee with the main reasons for the current increases in costs and housing shortage in Connecticut. Citing the cost of building materials, supply chain issues, inflation, liability concerns and the regulatory costs  to build a home. 

He stated that the cost to build a new home has gone up 35-40 percent since the start of the pandemic. Lack of skilled labor in the construction industry and lot shortages are also contributing factors in the housing crisis.  

However, the biggest barrier to home inventories is regulation costs. He said, “legal and regulatory costs are 24 percent of a typical new single-family home.” Nationally the average regulatory cost is almost $94,000 per home but these costs are higher in more highly regulated areas like the West Coast and the Northeast. 

Dr. Dietz also warned against, “reaching for policies that don’t work” in order to solve issues related to affording rent payments. He singled out rent control is a policy that, “99% of economists agree” does not work because it “acts as a tax on supply” and limits “additional construction that address housing affordability challenges.” 

Ignoring this clear warning from experts, lawmakers have put forth rent control legislation this week. The bill will prohibit rent increases that exceed 2.5 percent per year and establish rules for no-fault evictions. Currently the state does not have rent control laws and only those over 62 are protected from no-fault evictions. 

 Regionalize Your Schools or Else  

Towns with fewer than 25,000 residents that are not part of a regional school district or have a high school that operates under their local board of education will be penalized for not regionalizing. A recycled bill from 2021 will punish towns with a 20 percent reduction in reimbursements they may receive for school building project grants. The purpose of the bill is to encourage towns to join a regional school district. 

Approximately 60 towns will be impacted. Reimbursement rates are calculated annually and are based on many factors including the town’s wealth. 

When regionalization was proposed in 2019 hundreds of protestors assembled at the Capitol to speak out in opposition saying the effort would hurt property taxes and the quality of education offered by their local schools. 

 What To Do When There is a Budget Surplus…Raise Taxes 

This week numerous bills were introduced aimed at raising taxes on everyone that lives, works, or drives in Connecticut. The proposed bills are presented at a time when the state is projecting a $3.1 billion surplus and one of the healthiest rainy-day funds in the country. 

Lawmakers propose increasing the corporate business tax from 7.5 percent to 11.5 percent —which would make th state tied for worst in the nation with New Jersey— and adding a 5 percent capital gains surcharge on the sale or exchange of capital assets and on dividend and interest income.  

Another bill will create a state-wide property tax of 2 mills on commercial and residential property with assessed value of more than $1.5 million. At the same time another proposal will increase the assessment rate for property tax from 70 to 75 percent of the present true and actual value. 

After recent failures to introduce tolls and the Transportation and Climate Initiative legislators now want to punish those driving to work by adding a mileage tax. The bill calls for permitting the Department of Transportation to conduct a study on a mileage-based user fee on motor vehicles operated on state highways and a task force be established to study alternative transportation and funding strategies. 

The state already has one of the worst business climates, ranking 47th in a recent study by the Tax Foundation, these potential tax changes would move the state further down the list. 

 Labor Committee Sends Message That Connecticut Is Closed For Business 

The Labor and Public Employees Committee voted this week to authorize a slew of concepts to be drafted as bills that would hurt businesses.  

The committee wants employers to pay for worker strikes by allowing employees to collect unemployment benefits while striking. Workmen’s compensation could also be made available to all workers for expanded definitions of “post-traumatic stress injuries.” Employers may also be required to offer more paid sick days. 

The hospitality industry is finally recovering financially from the government-imposed lockdowns during the pandemic, but a new bill will reverse this trend. It will require businesses to pay the states minimum wage —currently $14.00 an hour— to tipped workers. Current law already ensures that tipped workers make at least the minimum wage by requiring employers to make up the difference for anyone’s salary and tips that do not add up to the minimum wage. With the minimum wage rising this year to $15.00 an hour this bill will only further drive-up costs for businesses and consumers.  

On a Positive Note 

Gov. Ned Lamont announced at a press conference that his first legislative proposal this year will include restoring the state’s pass-through entity tax credit to its original, revenue-neutral level of 93.01 percent and allowing small business owners to save money by claiming a larger credit on their personal returns. 

Lamont said, “These changes we are proposing will help small businesses in Connecticut save money, which they can use to reinvest back into their establishments to support their continued growth and the development of new jobs.” 

 

Meghan Portfolio

Meghan worked in the private sector for two decades in various roles in management, sales, and project management. She was an intern on a presidential campaign and field organizer in a governor’s race. Meghan, a Connecticut native, joined Yankee Institute in 2019 as the Development Manager. After two years with Yankee, she has moved into the policy space as Yankee’s Manager of Research and Analysis. When she isn’t keeping up with local and current news, she enjoys running–having completed seven marathons–and reading her way through Modern Library’s 100 Best Novels.

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