$1.7 billion is a lot of money — enough to give every single person in the city of New Haven a check for roughly $13,000.
Last Tuesday, in his second State of the City Address, New Haven Mayor Justin Elicker called out the fact that Connecticut’s billionaires have increased their wealth by this staggering figure — $1.7 billion — in the last year. Elicker called on Gov. Ned Lamont to increase taxes on Connecticut’s wealthiest residents as a way to get more funding for the Payment in Lieu of Taxes Program, or PILOT program, which reimburses cities for a portion of the property taxes they would have received on tax exempt properties. In the Elm City, those properties include Yale and Yale New Haven Hospital.
The remarks came after Elicker announced that the city could be facing a budget deficit as high as $66 million for fiscal year 2021-2022, which runs from July 2021 to June 2022. The number will be at least $41 million, Elicker said. If the PILOT program were better funded — under a proposal from Senate President Pro Tempore Martin Looney, at nearly double the rate — the city could close that gap. But that hinges on the governor’s willingness — or lack thereof, according to his communications director — to tax Connecticut’s wealthiest.
“Connecticut billionaires made many more millions over this past year while hundreds of thousands lost their jobs,” Elicker said on Tuesday. “There is something deeply wrong with this.”
By taxing Connecticut’s billionaires, the mayor argues, the state can generate additional revenue for its severely underfunded PILOT program. The program, which started in 1976, is supposed to reimburse cities with 77 percent of lost property taxes, but in recent years has only reimbursed 26 percent. In New Haven in particular, that lost reimbursement adds up: According to Looney of New Haven, over 50 percent of property in New Haven is non-taxable, due to the city’s large proportion of university-owned land.
But under a new proposal from Looney, that number would increase to 50 percent, which would result in New Haven receiving an additional $43.6 million. The second tier would be bumped up to 40 percent reimbursement, and third, made up of the wealthiest communities, would receive 30 percent, Looney said.
Looney told the News in an interview that overall, the increased funding would amount to $129 million. Looney, along with Elicker, is suggesting that this sum should be taken from the purses of the state’s wealthiest individuals. One potential route to this funding is to increase the capital gains tax: a tax on the growth in value of investments. Others include increasing the income tax on the state’s super rich, and what Looney has called the “mansion tax,” which would increase the property tax on every home in Connecticut valued at over $430,000.
Looney’s proposal also aims to address inequities between Connecticut cities that face vastly different municipal budgets and local property tax landscapes. Under current law, a city like Greenwich — the wealthiest area in the state — receives the same level of reimbursement as New Haven does, despite New Haven having 45 percent more non-taxable property, namely university and hospital property.
“We need to look at the capacity of towns to fund their own services,” Looney told the News.
The proposed change to the PILOT program has bipartisan support. Republican Michael Freda, first selectman of North Haven, has publicly expressed his approval of the program. Elicker, for his part, helped to organize getting 27 signatures from Connecticut mayors and first selectmen on a letter to Lamont asking for passage of the bill.
Looney also stressed this funding will go a long way to provide aid outside of New Haven.
“The difficult situation we’ve been in is that there are a relatively small number of towns eligible for significant PILOT [funding],” Looney said. “All of them need it desperately, but because there are so few of them, most other communities are more interested in broader categories of funding.”
However, movement on Elicker’s requests to the governor seems unlikely, according to Max Reiss, director of communications for Gov. Lamont. Lamont is not looking into tax increases, Reiss said, while underscoring some of Connecticut’s recent financial successes: a projected budget surplus and above-average job retention for the region.
“Governor Lamont has been consistent in the lead up to his budget address that he does not want to see broad based tax increases in the next two year budget,” Reiss said in a statement to the News.
There are currently seven billionaires living in Connecticut. Four of them are hedge fund managers, and four live in Greenwich. None live in New Haven.
Karen Pritzker of Branford, Alexandre Behring of Greenwich and Andreas Halvorsten of Darien, who are among the state’s seven billionaires, did not respond to a request for comment on proposed tax increases.
While a common critique of a wealth tax is that it may lead billionaires to leave and move to other states, Elicker told the News he was not highly concerned about the possibility of billionaires simply moving out of the state. The mayor said this was in large part because, even within Connecticut, there is a high variation in how much people pay in taxes from city to city. In New Canaan, a family owning a house with the same value as one in New Haven would pay roughly half the amount in taxes on their house as their New Haven counterpart. Elicker also pointed out that during the COVID-19 pandemic, Connecticut has seen an incredible “influx of interest” in its real estate market.
“Let’s not create a myth that if we tax people, then there will be no one else left to tax because they will leave the state,” Elicker said. “That may happen with some people, but it will not happen en masse.”
And at the end of the day, Elicker said Lamont must include more funding in his upcoming budget for municipalities like New Haven that are facing severe financial struggles. Elicker said that not only is Looney’s proposal pragmatic, but it also takes into account the state’s limited financial resources.
“The state and the Governor have a priority to ensure that working class and poor residents have more opportunities to thrive,” Elicker said.
The full transcript to Elicker’s State of the City address can be found here.
Thomas Birmingham | firstname.lastname@example.org