Ehrlich revives push for reduction in property tax

First-time buyers, poor would be key beneficiaries

September 14, 2005|By Andrew A. Green and Chris Guy | Andrew A. Green and Chris Guy,SUN STAFF


An article in Wednesday's editions of The Sun provided an incomplete description of Republican opposition to a plan by Democratic House leaders to reduce the state property tax earlier this year. All but one Republican voted against the tax break in the House Appropriations Committee, when it was amended onto to a larger omnibus budget-balancing bill. However, the omnibus bill later received a unanimous vote from the full House.

Gov. Robert L. Ehrlich Jr. renewed his push for a property tax cut yesterday, saying he wants to concentrate benefits on first-time homebuyers and the working poor.

A proposal by the governor for a 1-cent, across-the-board property tax cut was rejected by the state Board of Public Works in April, and Democrats said yesterday that despite recent good financial news, they remain worried about future shortfalls and are disinclined to support a reduction.

Ehrlich offered few details in a speech at a Realtors convention in Ocean City yesterday, but he said he plans to pursue a cut in the state property tax rate of a penny or more as part of a bid for even larger cuts in the future.

"I'd like it to be more than a penny," Ehrlich said. "It could be two; I don't want to put a number on it. But we could do this in a responsible way, and [it] will be better if it is permanent. We have an incredibly vibrant economy, and we can do at least a full penny."

Since April, tax collections have come in much higher than expected, leaving the state with about $600 million in unallocated cash, a development that has rekindled talk of tax cuts on the eve of an election year.

Added complication

The issue has become more politically complicated, however, than giving voters an election-season gift. Ehrlich, a Republican, has opposed most broad-based tax increases and is trying to partly undo a property tax hike he helped enact earlier in his term. But just a few months ago, most GOP legislators opposed Democrats' attempt to lower the rate.

"Now that it's getting closer to campaign time, it's becoming a more popular issue," said Democratic Party spokesman Derek Walker. "Rolling back the tax [Ehrlich] already increased, it's like robbing Peter and repaying Peter part of what you just stole. It doesn't pass the laugh test of leadership."

Del. Anthony J. O'Donnell, the House minority whip from Southern Maryland, voted against a House property tax cut proposal last year but said he would be inclined to support the governor's plan. He said he saw the House plan as political grandstanding - Democratic delegates had voted for large tax increases a year earlier - but believes the governor will make a responsible proposal.

"When you see the liberals one year screaming for a $1 billion tax increase and the next year screaming for a tax cut, it doesn't really make sense," O'Donnell said. "You've got to consider the source, and this governor has a proven track record of fixing large fiscal problems without major tax increases."

Paul E. Schurick, Ehrlich's communications director, said the governor would like to find a way to direct the tax cut to first-time homebuyers or the working poor, because an across-the-board reduction would make relatively little difference to most homeowners - perhaps $25 a year on average.

By concentrating the benefits, the state could help those who have been hurt most by the recent rise in housing prices and the tax assessments that go up with them, Schurick said.

Details will be developed in conjunction with legislative leaders over the coming months, and the proposal would likely not come before the Board of Public Works for final approval until the spring of 2006, when the board will set the state tax rate to cover bond debt payments, Schurick said.

`Wrong time'

The other two members of the board, Comptroller William Donald Schaefer and Treasurer Nancy K. Kopp, blocked Ehrlich's proposed cut in April, and spokesmen for the Democrats said the recent good financial news has not changed their minds.

Schaefer "is adamant that he thinks this is the wrong time to call for a reduction," because state commitments for spending in the next few years, such as a plan to pump more money into education, are projected to outpace revenues from taxes, said his spokesman, Michael Golden. Kopp spokesman Howard S. Freedlander said the treasurer shares Schaefer's qualms, and worries that a tax cut could jeopardize the state's AAA bond rating.

Faced with a budget crisis, Ehrlich proposed in 2003 increasing the state's portion of the property tax from 8.4 cents per $100 in assessed value to 13.2 cents.

State law requires that the tax rate be set high enough to cover bond payments, but for years governors had used general fund money to keep the rate artificially low. The increase, the first in decades, amounted to $120 a year for the average single-family home. The state portion of property taxes is much lower than the amount charged by counties and Baltimore City.

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