Why 2.849% and not 2.59%? The Tolland Budget Increase vs Tax Increase, Explained


A few people have asked why a tax increase of 2.849% is required for a budget increase of 2.59%, saying that it just doesn’t make sense. On the surface of the problem, it certainly doesn’t! Here’s a quick explanation which I hope helps make sense of these two different numbers.

For purposes of discussion, let’s assume that our town budget was $100 last year, and that we need $105 this year. That’s a 5% increase in the budget. If we had to raise all of that money ourselves through taxes, the tax increase would be 5%, too.

But some of that $100 comes from the state government. Let’s say the state contributed $50 of that budget last year, leaving the town to raise only $50. Now let’s say that the state will contribute the same amount this year, $50, leaving us to raise $55. Last year, we only had to raise $50. This year, we have to raise $55. Year over year, that’s a 10% increase in taxes.

So a 10% tax increase is required even though the budget only went up 5%, and that shows how the two numbers can be different.

In real life, we have the same thing going on, but with different numbers. This year’s budget is about $53 million, an increase of 2.57% over last year. About $13 million of our budget comes from the state, so last year we needed $39 million in taxes. This year, the state is giving us the same amount, about $13 million, so we’re left to raise just over $40 million in taxes. The difference between last year, ≈$39 million, and this year, ≈$40 million, is about 3.28%.

If the grand list were kept just as it is, the tax rate would be going up by 3.28%. But there are adjustments to the grand list year-over-year, too, and these adjustments reduce the amount to 2.849%, which is different from the budget increase of 2.57%.

No mystery, just math.

Want to know my position on this budget? I support it. Read why here.

(All of these numbers can be found in the Town’s 2014-2015 budget, which can be viewed here.)

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