The Tax Cuts and Jobs Act, passed in December 2017, capped the state and local tax deduction. As a result, property taxes in states like Connecticut with high SALTs may be negatively affected, according to Moody's analysis.
Richard Pomp, professor of law at the University of Connecticut, explains, “Because fewer people are going to be able to deduct the property tax, there is the concern that this will lower the demand for housing. That will lower a municipality’s property tax base at the next reassessment.” CityLab reports that more than 41 percent of tax returns in Connecticut included a SALT deduction in 2014, and that property taxes account for twice the national average at 60 percent of local revenues.
Connecticut also ranks as the state with the highest income inequality across the nation. This is reflected in enormous disparities between rich and poor cities and their ability to fund services through property taxes. Despite the stark difference in their circumstances, both rich and poor cities are likely to feel the sting of the new federal tax regime, thanks to high fixed costs (like pensions) that affect everyone, and a state government whose finances are as tricky as any city’s.
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