3 counties fear passage of tax-cap legislation

November 02, 1992|By John Rivera | John Rivera,Staff Writer

Officials in Anne Arundel, Prince George's and Montgomery counties are bracing for what they say will be certain economic disaster if voters pass property-tax caps that appear as charter amendments on tomorrow's ballots.

The tax caps, they say, when combined with the effects of a lingering recession and impending cuts in state aid to local governments, will lead to deep cuts in services, particularly in education, fire and police protection, and libraries.

"The long-term impact over the next four to five years, I believe, would be devastating," said Prince George's County Executive Parris N. Glendening.

The caps in all three counties would limit the growth in total property tax revenue. Individual homeowners' assessments would continue to rise, but because the total could grow only so much each year -- tied to the rate of inflation with a cap of 4.5 percent or 5 percent -- counties would be forced to lower their tax rates to stay under the cap.

This is especially true in Prince George's and Montgomery counties, where the proposed measures would include new construction under the cap and therefore would not allow the tax base to expand.

In other words, as new homes and businesses are built and added to the rolls, tax rates would have to be lowered even more to keep total revenue within the designated cap.

Montgomery County passed a tax cap in 1990 that limits property tax growth to the rate of inflation but exempts new construction.

The Anne Arundel County measure would limit the growth in property tax revenue to the rate of inflation up to 4.5 percent but exempts new construction.

The proposed charter for Carroll County on that county's ballot also includes a potential tax-rate cap, saying that at least four of five council members would have to vote for any tax increase that exceeds the current tax rate plus an increase for inflation.

Instead of being penalized by limitations, county governments should be congratulated for holding spending down, especially in the face of cuts in state aid, officials say.

"Our budget is already smaller today than it was two years ago," said Gene Lynch, chief assistant to Montgomery County Executive Neal Potter.

The budget for fiscal year 1993 is $1.516 billion, compared with $1.520 billion in 1991.

But that kind of talk does not mollify the anti-tax activists who sponsored the ballot measures.

Robert C. Schaeffer, president of the Anne Arundel Taxpayers Association, said he led the petition drive for that county's Question D because politicians can't be trusted to be fiscally responsible.

"All it says, basically, is that the county can't get any more from property tax revenues than the cost of living," Mr. Schaeffer said. "So, I'm not cutting a dime. I'm cutting the rate of growth."

Robin Ficker, a Bethesda lawyer who spearheaded Montgomery County's Question A by collecting 16,000 signatures, said the final straw was the County Council's vote earlier this year to increase the piggyback income tax from 50 percent to 60 percent. Then, he said, the county turned around and gave pay raises to its employees.

"It's the old argument that if they have money they're going to find a way to spend it," Mr. Ficker said.

So, he wrote the ballot measure stating that if the county wanted to raise the income tax, it would have to decrease property taxes an equivalent amount after they were adjusted for inflation.

"They can raise [income taxes] under this," Mr. Ficker said, rejecting the county's argument that the initiative may be illegal because it would prohibit a tax increase allowed under state legislation. "This just puts in a property tax penalty."

Montgomery County officials said there are only two options if Question A passes: They would have to roll back the income tax to its previous 50 percent level, a move that would cost the county $55.5 million; or, they would have to cut property taxes by an equivalent $55.5 million, and the county would lose an additional $8.5 million that would have come from new homes and businesses.

But the bad news only begins there. Because of the question's wording, the equivalent revenue cut from property taxes would be subtracted from each previous year's total.

For example, Montgomery County will collect $700 million in property tax revenue this year. If Question A passes and the 60 percent piggyback tax rate is retained, property tax revenue must be cut by $55.5 million, to $649.5 million. The next year, if the piggyback tax is retained, an additional $55.5 million would be cut, not from the original total of $700 million, but from the adjusted total of $649.5 million.

The picture is no rosier for Prince George's County government. Question D simply would limit the growth in property tax revenue to the rate of inflation for the Washington, D.C., metropolitan area or 5 percent, whichever is less.

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