The wrong tax cut

September 21, 2007

As appealing as a reduction in property taxes may sound, Gov. Martin O'Malley's proposal to shave 3 cents off the state property tax rate over the next three years isn't smart policy. And yet there he was yesterday in Howard County touting the tax cut as a boost for seniors and others living on a fixed income. That may be true - to a modest degree - but what the governor's $2 billion deficit-reduction proposal giveth, it also taketh away. This is one tax cut he ought not be bragging about. Here's why:

The state property tax rate is a measly 11.2 cents for each $100 in assessed value. The money is supposed to be used to finance the state's general obligation bonds, but it falls about $29 million short. Throw in a 3-cent tax cut and it's eventually another $177 million or so in the red. The difference has to be made up with other taxes - including far more regressive ones.

Nobody likes paying property taxes, but on a statewide basis, Maryland's are pretty reasonable. According to the Tax Foundation, the per capita property tax payment in Maryland is actually $131 below the national average. That's chiefly because local governments in Maryland collect more from income taxes than most peers.

Nor will anyone get rich from the proposed tax cut. Mr. O'Malley's calculations show that the average family with a $50,000 income would get a $45 break when the full 3-cent reduction is in place. That's a night at the movies - with a small popcorn split four ways.

The real problem with Maryland's property tax is at the local level, not the state. Baltimore residents pay far too much compared with surrounding counties. Take the $177 million and turn it into local aid, and the city could drop its property tax rate of $2.28 by at least one-fourth. That could help spur jobs and prosperity that would ultimately make Baltimore less dependent on state aid. That's a far worthier goal than a specious statewide tax cut.

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