City's piggyback tax in trouble?

November 25, 1992

Mayor Kurt L. Schmoke's proposal to raise the piggyback income tax city residents pay from 50 to 55 percent has caused a predictable hue and cry in the City Council. "We're taxing ourselves out of business here," Councilman Anthony J. Ambridge, D-2nd, harrumphed. "It's going to be a hard sell."

The council members who echoed that sentiment have a point. With Baltimore City already taxing its property owners twice as much as the suburban counties, an increased piggyback tax would seem to be a ticket to disaster. But is there an alternative? Can enough fat be found in the municipal operating budget to bridge an expected shortfall next fiscal year even as future prospects for increased state and federal aid -- the city's twin crutches -- seem cloudy at best?

Mayor Schmoke wants a piggyback tax increase to commence Jan. 1. Estimating it would raise $10.2 million in revenue, he would use the extra money to beef up public safety -- which he sees as a major concern among taxpayers -- and to cushion the impact of expected shortfalls in the state and federal aid the city receives.

The majority of council members, however, argue that providing tax relief to city residents is more important. They think the $800 million general fund -- which is covered by local taxes and is part of the $2 billion overall budget -- has enough fat in it to permit quite a bit of trimming and shifting around. Those politicians are supported by the Baltimore City Homeowners Coalition for Fair Property Taxes. The group's president, Daniel J. Loden, argues that the "piggyback is a wrong tax anyway and to use it as a temporary fix is wrong."

If this were merely a parochial Baltimore City question, the City Council view probably would easily prevail. But it is not. The city's elected officials also have to take into consideration how their actions will play in the Maryland General Assembly. That legislative body authorized increases in local piggyback taxes. Among major jurisdictions, Montgomery, Prince George's and Baltimore counties have already exercised that option. If the city refuses to follow their lead -- while continuing to cry poverty -- it is likely to trigger even more hostility in Annapolis.

Baltimore City's plight is exceptional. Its declining number of substantial taxpayers have been taxed to a point where each further revenue enhancement brings smaller and smaller returns. In fact, for the first time ever, the wealth of the city contributed by its residents has stopped growing. But the piggyback tax seems like a politically necessary move which will also buy the city more time to develop strategies for dealing with its long-term fiscal dilemma.

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