Foreclosure tax repeal? Don’t count on it.

Politicians do love their taxes, after all.

Brian Lockhart

The Democratic-majority General Assembly is expected to meet in special session June 21 to yet again extend increases in the conveyance tax applied to real estate transactions.

But it is uncertain whether legislators will simultaneously eliminate a new conveyance tax which, since January 1, has been levied on foreclosures.

A few years ago state lawmakers increased the real estate conveyance tax to help funnel additional revenue to cash-strapped cities and towns. The hike was supposed to have sunset, but it keeps getting extended in the face of pressure from the Connecticut Conference of Municipalities.

When the 2010 legislative session ended at midnight May 5, the House of Representatives had again extended the increases, scheduled to expire at the end of this month, for another year. But the Senate failed to take up the measure. Democrats at the time told an enraged CCM it was an oversight and they would make it right during a special session.

And CCM has been keeping the pressure on.

The foreclosure tax was quietly slipped into the two-year state budget the General Assembly passed last September. But the move, estimated to generate $8.5 million this fiscal year and $16.2 million in the fiscal year that begins July 1, proved controversial.

Critics like state Sen. Bob Duff, D-Norwalk, who as Banks Committee co-chairman has been spearheading foreclosure mitigation programs, complained the tax was never given a public hearing.

And while proponents argued the foreclosure tax would be paid by the banks, Duff and others feared it would instead be borne by financially hurting property owners. The state Judicial Branch confirmed that to be the case and judicial officials also had a tough time figuring out how to calculate the tax.

By April there appeared to be a growing consensus that the conveyance tax on foreclosures had been a bad, hastily done policy decision.

“It is tantamount to kicking delinquent homeowners when they’re down,” said Sen. Andrew Roraback, R-Goshen, one of the very few lawmakers who actually raised questions about the tax during the budget debate.

Even Sen. Eileen Daily, D-Westbrook, who, as co-chairman of the Finance, Revenue and Bonding Committee, helped craft the state budget, acknowledged extending the conveyance tax to foreclosures “never worked … To just exempt them is what makes the most sense.”

However, when I asked Derek Slap, spokesman for the Senate Democrats, about the issue today, he told me there is a concern about losing that estimated $16.2 million during the ongoing budget crisis.

“The issue of changing the scope of the conveyance tax has been raised but clearly there is a lot to consider,” Slap told me.

I put in a call to the state Department of Revenue services to find out if in fact the foreclosure tax has been meeting the original revenue expectations. But a DRS spokesman told me they did not have that data available.

Nicholle Dagata, president of the Connecticut Association of Realtors, said that organization agreed to suspend its traditional opposition to an extension of the conveyance tax increase as long as the policy was changed to again exempt foreclosures.

“We feel the state is striking against the most vulnerable,” she said. “We just think it’s absurd. They’re already in a dire situation.”

6 Comments

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6 responses to “Foreclosure tax repeal? Don’t count on it.

  1. Burning Madolf

    Of course they will slam these people on the way out the door.

    Every big, underfunded pension state (CA, NY, IL, CT, etc.) has to stick it to someone before they leave.

  2. I don’t get it. My tax money has already bailed the banks out so that they didn’t have to pay the consequences of writing bad loans. Why should they also get a tax break that I’m not eligible for?

    Repeal the conveyance tax for everyone, or continue to apply it to everyone equally.

  3. Old School Grump

    Anonymous at 1:39, I’m surprised no one has responded to your comment and link thus far. Assuming the reporting is accurate (I know nothing about the Washington Independent), I find myself challenged by the idea of The Government administering Tinkle Tests to welfare and unemployment recipients.

    On the one hand, given that I had to pass a Tinkle Test, plus demonstrate my citizenship via SS card and passport, to get hired, plus know I could be Tinkle Tested at any time, plus work every day sporting a computer-coded ID badge that determined which floors I was or was not allowed to access–all for the privilege of earning a living so I could pay the f***ing NYC taxes for unemployment and welfare

  4. Old School Grump

    Oops, I seem to have hit the wrong key and sent off my rant-in-progress before it was complete. Sorry for the incoherence. You probably got my drift anyway.

  5. As a taxpayer, I think we are just getting used to getting slapped on boths side of the face.