Parking Tax Raises Doubts

February 07, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Could the Law of Unintended Consequences be coming to Baltimore?

Some downtown boosters are afraid so, as word spreads of an obscure new tax on company-paid parking, which became effective last year as part of a 1992 law passed under President George Bush to encourage use of mass transit.

Company-paid parking reimbursement or company-provided parking valued in excess of $155 a month now is taxable income. For principals in partnerships such as most law firms and small, tax-advantaged companies called Subchapter S corporations, parking benefits are taxable from the first dollar onward.

"We think it's a bad bill," said Ed Spiva, executive vice president for economic and business development at Baltimore Development Corp., the quasi-public group that spearheads the city government's redevelopment efforts.

"It's one more nail in the coffin of pushing companies from a big-city urban site to the suburbs," he said.

The reason is simple: most suburban office locations have "free" parking, or at least parking whose cost is included in the rent of the companies that fill the offices. No one has to pay daily to park in most suburbs, and even paid parking expensive enough to trigger a tax liability is practically unknown in suburbs around Baltimore.

But even downtown, the tax won't hit Baltimore very hard, at least not initially, because few garages charge more than $155 a month. Indeed, parking rates have been falling in Baltimore in recent years, partly because of the recession.

For Baltimore Gas and Electric Co., for example, the tax will affect only about 20 cars, spokesman Art Slusark said. Nine company cars of senior executives cost $170 a month to park because they have reserved spaces in a garage near BG&E headquarters, he said.

BG&E pays $175 a month for about 10 more cars at the 250 W. Pratt St. home of its Constellation Holdings unit.

"The economic impact on BG&E and its employees is infinitesimal," Mr. Slusark said. That view was seconded by representatives for T. Rowe Price Associates Inc., which reimburses parking for eligible employees only up to the $155 limit, and Legg Mason Inc., where spokeswoman Geraldine Leder said workers pay their own parking tabs.

The local division president of a company that controls about 30 parking garages and lots downtown was skeptical that the tax would change many companies' decisions about where to locate.

"I don't think it will," said John Gann, president of Allright Baltimore Inc. "Very few people pay more than $155 a month."

Indeed, the impact is almost entirely to be felt within two blocks of the Inner Harbor. Allright's only garages charging more than the threshold are at the Bank of Baltimore building at Calvert and Baltimore streets ($170 a month) and the Charles Center South building at 36 S. Charles St. ($169 a month).

L Even in those buildings, most workers will feel little bite.

A high-earning executive in the new 36 percent tax bracket wouldpay $5.40 a month in extra tax if her employer picked up the tab for parking in the Bank of Baltimore building garage.

Most workers, in the 28 percent bracket, would pay $4.20 a month. But if those same workers were principals in a partnership or S corporation, the tab could go as high as $61.20 a month because the full value of those workers' parking benefit is taxed.

Many workers or small business owners will say "I'm going to pay $500 in taxes so I can work downtown. Uh-huh," predicted Joe Casey, president of Casey & Associates, a downtown-based commercial real estate firm.

Mr Casey said that even though the dollar impact is much smaller than $500 a year for most workers, it adds a psychological barrier to the list of reasons to do business outside the city.

"The city can't afford that," he said.

Even the impact on partnerships such as law and accounting firms could be limited, however. Many don't pay for their partners' parking, and those that do often feel they must be downtown to do their business.

"There aren't many businesses of any size doing business in Baltimore in partnership form," said Neal Borden, a tax attorney at Venable, Baetjer & Howard, which he said does not pay for its partners' parking in the garage at the Mercantile-Safe Deposit & Trust building.

"It could be a problem for people who park in downtown Washington or New York," he said.

"I don't think it would be substantial enough to [lead to a move to the suburbs]," said Gene Funk, a partner at the Baltimore law firm of Rosenberg Proutt Funk & Greenberg, which does pay for partners' parking. "The benefits to us of being in the city are more than the tax."

Despite business-community grousing about President Clinton's tax-raising ways, the plan has nothing to do with last year's efforts to curtail the federal budget deficit.

The tax on parking was designed as a way to pay for a tax break for companies that wanted to subsidize employees who commute via mass transit, said Rep. Benjamin L. Cardin, D-3rd, a member of the House Ways and Means Committee.

The same bill increased the amount companies could pay to employees who use mass transit, Mr. Cardin said. Companies can reimburse employees for up to $60 per month for bus or train passes, up from $21 before.

The parking tax was meant to even out the revenue the government was giving up by cutting taxes on mass-transit reimbursement, not cut the deficit or pay for social programs.

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