Describing the recently passed Tax Cuts and Jobs Act as hurtful “in a big way,” U.S. Sen. Chris Murphy said that home values in Connecticut, if not the entire country, will likely drop, while vowing to continue fighting to amend or overturn the law.
Murphy’s comments came during a Jan. 5 address at the offices of Berkshire Hathaway HomeServices New England Properties in Fairfield attended by about 50 area Realtors and homeowners.
“It was not a great day for Connecticut when this bill was passed,” Murphy said. The law,
he said, was designed “to hurt states that have higher property values and Connecticut is at the very top of that list.”
Critics of the new tax law have maintained that its changes to state and local tax and mortgage deductions could be especially damaging to residents of such high-cost states as Connecticut, New York, New Jersey and California. The law increases the standard deduction and family tax credits, but eliminates personal exemptions, limits deductions for state and local income taxes and property taxes and further limits the mortgage interest deduction.
“There’s no doubt that there are people who will receive benefits from this bill,” Murphy said. “But almost 40 percent of taxpayers itemize deductions,” something the law makes less beneficial than in
Although he worked as a commercial real estate lawyer with Ruben, Johnson & Morgan in Hartford before beginning his political career in 1998, Murphy said he was looking to practicing Realtors for information and advice on the issue. A Realtor from Wilton said a home that had sold for $2.2 million in 2013 had recently been sold again for just $1.5 million.
Fairfield First Selectman Mike Tetreau said that on average, a homeowner must spend 25 percent of the cost of his home to service it. “Everything was based on helping people buy houses” in the past, he said. “Anything that impacts that hurts our entire economy.”
Murphy agreed that changes to the real estate market can have a ripple effect on the national economy. “If the market slows down, no one escapes,” he said, echoing the National Association of Realtors’ estimate that the bill will result in at least a 10 percent property devaluation across the board.
While praising the new law’s reduction of the corporate tax rate from 35 percent to 21 percent, Murphy noted that changes lowering individual tax rates for most citizens are only temporary, and will expire on Dec. 31, 2025.
According to the nonpartisan Tax Policy Center, taxpayers with incomes between $25,000-48,600 would receive a tax cut averaging $380 but a tax increase averaging $40 in 2027; those making $48,600-86,100 would receive a tax cut averaging $930 in 2018 but an increase of $20 in 2027; and those making $86,100-149,400 would receive a tax cut averaging $1,810 this year and $30 in 2027.
Taxpayers in the top 1 percent of income — making at least $732,800 — would receive a tax cut of $51,140 this year and a cut of $20,660 in 2027.
Murphy also decried the tax plan’s addition of $2 trillion to the national debt over the next 10 years. The Congressional Budget Office has put that figure at about $1.46 trillion, while tax analysts at the Wharton School at the University of Pennsylvania have predicted the national debt will rise by $1.9 trillion to $2.2 trillion with the tax law changes. .
The senator argued that the plan relies upon the concept of trickle-down economics, an economic theory ostensibly disproved during the Reagan administration.
Republicans believe that by providing tax cuts that most benefit the top 1 percent, that money will be injected into the economy and thus help everyone, Murphy said. “Democrats would rather put money into the middle of the economy and watch it trickle out,” he added.
The tax act’s $2 trillion cost “will preclude investment in our infrastructure,” a pressing need everywhere but especially in Connecticut and the Northeast at large, Murphy said.
It takes “a hell of a lot longer” to get to New York City from Fairfield than it did 30 years ago, he said, and the state of disrepair of many of Connecticut’s highways, bridges and train facilities disincentivizes many companies from moving here. “The corporate tax cut helps, but more important is investment,” he said.
The Northeast Corridor, the electrified railroad Line that runs from Boston to Washington, D.C., needs $50 billion just to maintain current conditions, Murphy noted. Without federal help, he said, “Ultimately we have to solve our problems ourselves in the Northeast.”
The senator also agreed with an audience member’s suggestion that state lawmakers should consider regionalizing services to relieve the costs of maintaining separate services in each of Connecticut’s 169 municipalities – an idea that Christopher Bruhl, president and CEO of The Business Council of Fairfield County, supported in a recent interview with the Business Journal.
As for the new federal tax law, Murphy said Democrats “will do everything we can to repeal this bill or change it, if we take control of Congress” in the 2018 midterm elections.
Asked why Democrats and Republicans cannot make more of an effort to work in a bipartisan way, Murphy said attempts continue to be made, but often to little avail. As a result, he said, “Congress’ popularity is slightly lower than