New services tax hurts working families, seniors

The O'malley Budget Plan

October 03, 2007|By Carole A. Maclure

Gov. Martin O'Malley's proposal to create taxes on property management services - and its timing - could not be more unfortunate. Mr. O'Malley has pledged to look out for the interests of working families. But the new levy he has announced will affect 639,000 Maryland renters, as well as those who own condominiums or townhouses - many of them first-time homebuyers and seniors - who receive services from a property management company.

Under the governor's proposal, the Maryland sales and use tax would rise to 6 percent and apply to a variety of services, including property management services. Sales taxes, including taxes on services, are typically passed on to consumers. This new tax on property management will fall disproportionately on working families and small businesses struggling to make ends meet.

As just about any homeowner can tell you, the last thing Maryland needs now is another tax on property ownership. Real estate is the highest-taxed sector of the state economy. More than $300 million in new or higher real estate tax bills were proposed in the General Assembly last year. In the past five years, more than 20 different real estate taxes have been increased or signed into law by local and state governments. But even without those tax increases, real estate contributed hundreds of millions of new tax dollars to state, municipal and county coffers in the last five years.

True, the governor has said he will propose a reduction in the state property tax. That would help, but only if the counties didn't offset that cut with another round of real estate tax increases.

Even without this new tax, Maryland is a very expensive place to live. According to a 2006 study conducted by the National Low Income Housing Coalition, ours is the seventh-most-costly rental market in the country. For low-wage earners, the situation is dire. According to the coalition, many would have to work three jobs year-round to afford the average fair-market two-bedroom rental.

This new tax on property management would not raise enough money to significantly close the budget gap. Indeed, the fiscal analysts in the legislature estimate that the best the state could expect to collect would be $34 million of the $1.7 billion budget gap.

Real estate is an important part of the economic engine that has fueled Maryland's spectacular growth. Our organization supports the governor's goal to balance the budget, and we don't envy him this difficult task. But real estate contributes more than its fair share. Now is not the time for a new real estate tax.

Carole A. Maclure is the 2008 president of the Maryland Association of Realtors. Her e-mail is carole.maclure@longandfoster.com.

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