Tab is put at $150 per taxpayer

March 15, 1995|By Kerry O'Rourke | Kerry O'Rourke,Sun Staff Writer

A proposed increase in Carroll's piggyback income tax would cost the average taxpayer about $150 a year, budget officials said yesterday.

The County Commissioners proposed the tax increase Monday as a way to raise much of the money needed to build eight schools in the next six years. They said they also might initiate a county property transfer tax and a hotel/motel tax.

Commissioner W. Benjamin Brown said the county needs more revenue to afford to build schools and other facilities that have been stretched to the limit by population growth.

"No one is going to be happy," he said of a tax increase.

If the piggyback tax is increased to 60 percent of the state income tax rate from 50 percent, the tax owed per tax return filed from Carroll would increase $151, said Jeffrey K. Topper, operating budget and revenue supervisor in the county Department of Management and Budget.

The piggyback tax is a county income tax levied in addition to the state income tax. The state, which collects the money and returns it to local jurisdictions, allows counties to charge 60 percent of its 5 percent rate.

The increase would raise $4 million for Carroll in fiscal 1996, because the new rate would be in effect half a year, and $9.3 million in fiscal 1997, Budget Director Steven D. Powell said. Fiscal 1996 begins July 1.

Should Carroll increase its tax, the county would be one of seven in Maryland to levy a piggyback tax at the 60 percent level, the highest allowed by the state. The other counties are Allegany, Montgomery, St. Mary's, Somerset, Talbot and Wicomico.

Commissioner Donald I. Dell and Mr. Brown said they would support a piggyback tax increase. Commissioner Richard T. Yates is opposed to the plan.

Prince George's County levies the tax at 58 percent and Queen Anne's and Baltimore counties levy it at 55 percent. All other counties, except Worcester, levy the tax at 50 percent. Worcester's rate is 30 percent.

The commissioners also are considering a county transfer tax on property and a hotel/motel tax. Both would be charged in addition to the state taxes. Because Carroll has a commissioner form of government, it would need General Assembly approval before enacting either tax; the earliest the legislature could act on a request would be next year.

With a .5 percent tax on real estate transfers, the county could have raised $2.1 million in the past fiscal year, Mr. Powell said. The state rate is .5 percent.

Sixteen counties and Baltimore City impose a local transfer tax, according to the Department of Fiscal Services. The rates vary from .2 percent to 1.6 percent.

Counties in the Baltimore metropolitan area that impose the tax are Anne Arundel, Baltimore, Harford and Howard.

Helen Utz, executive director of the Carroll County Chamber of Commerce, said a county transfer tax would increase the cost of buying a home by raising settlement costs.

"Anything that increases settlement costs will be a deterrent for economic development," she said.

Frank Kosmakos, president of the Carroll County Tourism Advisory Council, said a county tax on hotel/motel stays would hurt tourism. Customers realize that the tax simply raises the price of a room, he said.

He cited a 1991 Purdue University study that found that the number of rooms rented declined 4.4 percent for every 10 percent increase in room rates or taxes added to rates.

"Categorically, it's a bad idea," Mr. Kosmakos said. "What they [the commissioners] really need to do is stimulate business."

If Carroll had enacted a 5 percent hotel/motel tax in the past year, the county would have collected $133,910, Mr. Powell said. The state tax is 5 percent.

All but five Maryland counties have enacted hotel/motel taxes, according to the Department of Fiscal Services. Besides Carroll, the counties that do not levy the tax are Calvert, Caroline, Frederick and Harford.

St. Mary's County indefinitely suspended its 5 percent tax last year because there were complaints that tourists were bypassing the county to stay in a neighboring county that did not levy the tax.

The hotel/motel tax rate in Maryland counties ranges from 3 percent to 7 percent. In 11 counties, money generated from the tax in cities and towns is returned to the municipalities.

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