WESTPORT — All politics are local and in the end, all political decisions affect the local scene. The new federal tax plan is no exception and, according to members of the Board of Finance, will have a negative impact on town residents, especially those who own large houses.
“Houses that have a high valuation will get hit and quite probably depending on the situation of the individual in the house it will be a detriment to the disposable income of the house,” Board of Finance Chairman Brian Stern said of the new tax plan, which caps state and local tax deductions on property at $10,000.
Stern said the tax plan makes Westport’s larger homes less attractive to potential buyers and thus threatens the town’s ability to compete, from a tax perspective, with surrounding towns in Connecticut and Westchester County, New York.
BOF member Lee Caney, a partner in an international law firm specializing in tax law, took a broader geographical view and said the tax plan will make Westport less attractive compared with towns in low-tax states.
Westport home facts
Median household income: $166,307
Median home value: $1,087,700
Median monthly homeowner costs (with a mortgage): $4,000
*Data according to the U.S. Census Bureau
sampling between 2012 and 2016
“Because we live in a high tax state and residents can no longer deduct their state income taxes, people who can move, especially because they don’t have kids or jobs, may move to places with low state income taxes, like Florida and Texas,” Stern said. The potential outflux of people to low-tax states will affect property values in town, which is a big concern, Stern said.
First Selectman Jim Marpe predicted as much in his Dec.15 letter to a number of federal legislators in which he said the new SALT deduction cap, “has the potential to significantly reduce property values, which in turn affects the town’s ability to collect the necessary property taxes to maintain our quality of life,” Marpe wrote.
With a median household income of $166,307 and median house value of $1,087,700, according to U.S. Census Bureau data from 2012-16, Marpe wrote, “A full two-thirds of Westport homeowners, young families and elderly alike, are already paying more than $10,000 in annual real estate taxes, and would be negatively affected by this bill.”
In light of the new tax burden for many of the town’s households, Stern said the BOF will be conservative in constructing the town budget in order to avoid increasing the mill rate.
“We’ve got a lot of projects to complete, between the library, Compo Beach improvements and the senior center — things we’re already committed to, and we’ll complete them, but we’re going to be very careful where operating expenditures go. We have a lot of work to do, especially with the school budget, which is the biggest expenditure for the town,” Stern said.
BOF Vice Chairman Michael Rea echoed the need for a conservative approach to budget planning and said the board will look for efficiencies and scrutinize the budget line by line. The coming budget year will be challenging, Rea said, because, “with the state not funding us under the educational formulas Westport comes up empty-handed.”Read Full Article
Stern said the exact fall-out of the new tax plan is unclear, but said he knows one thing for sure. “This is not a positive. Anyone who thinks this will have a positive impact is wrong. The question is to what degree it is a negative impact.”