Tax relief seems like a `robbing Peter' idea

January 04, 2008|By JEAN MARBELLA

Pie charts and bar graphs and linear projections - oh my!

I'm beginning to have a Pavlovian reaction to such graphics, particularly when they're used to justify a change in taxes. I see one and I feel an immediate pinch - in my wallet.

It was just 3 1/2 months ago, after all, that Gov. Martin O'Malley traveled the state, from Stoneleigh to Ellicott City, from a downtown rooftop to a bucolic horse farm, with his own pie-charted and bar-graphed scenario. O'Malley was selling a plan on how he would increase revenues to make up a projected $1.7 billion deficit via a combination of new, expanded or reconfigured taxes.

His charts showed that even though some taxes would rise, most Marylanders would pay less than they currently do. Initially, the estimate was that 95 percent of us would pay less, although that was later modified to the lesser but still pretty impressive 83 percent.

Well, you saw how that turned out - after the General Assembly met in special session, after legislators approved quite a different tax plan, the upshot was that only 45 percent of Marylanders would pay the same or less in taxes.

So it is perhaps with a slightly jaundiced eye that I look upon this latest set of charts, this time produced by a city task force looking to reduce Baltimore's property tax rate, which is the highest in the state and twice or more that of some nearby suburbs. Yesterday, the blue-ribbon committee issued its findings: Yes, the property tax indeed can be reduced, the report concluded, but you also would have to raise things like the income tax, the hotel tax and the cap that keeps the taxable value of your home from rising no more than 4 percent a year.

And if you want the property tax rate to shrink even further, you'd have to consider things such as adding a local sales tax (on top of the state sales tax increase that just went into effect) and allowing full casino gambling (in addition to the slots that are up for referendum).

Hmmm, why do the names Peter and Paul suddenly spring to mind, as in robbing the former to pay the latter? Why do the words "deal" and "devil" also come to mind?

The committee now has to sell this plan at perhaps the worst possible time: Already taxpayers are feeling besieged, what with the newly enacted state tax increases. In addition to the new 6 percent sales tax that everyone started paying yesterday, smokers, car buyers and users of computer services and wage earners in upper-income brackets are also going to pay more this year. Couple that with the continuing uncertainty of the housing market - sales are down, foreclosures are up, and who knows for how much longer - and people are understandably leery of any pocketbook issues that come down the pike.

Still, credit the city with trying to scale back local property taxes - an entirely welcome effort, particularly since O'Malley's proposal to roll back statewide property taxes to offset the increases in other taxes vanished during the special session.

But reducing the city's property taxes only to increase other taxes and raising the so-called homestead credit cap from its current 4 percent doesn't offer true relief. It's like squeezing one end of a balloon, forcing the air to the other end - no volume has been lost.

While it's easy to accept a hotel tax - sure, let the out-of-towners pay more - raising the income tax and the homestead cap will be taking money out of the same pockets that you've just added to by lowering the property tax.

It's a little more complicated than that, of course - the cap doesn't benefit everyone. It's great for existing owners of homes whose value has been jumping rapidly and regularly, but not for those whose assessments have remained flatter. And the cap doesn't do anything for new buyers, at least initially, because their property tax is calculated on the full assessed value of the house, not the capped value as for the previous owner.

"It's almost like a dog chasing its tail," committee co-chair Joseph T. "Jody" Landers said yesterday. "We set the cap so low because our rate is so high."

Landers argues that the city needs to break that cycle and that lowering the property tax rate - even while raising the homestead cap - benefits all homeowners. It makes buying in the city more attractive, he says, which serves to broaden what he calls the city's "feeble" tax base.

By some scenarios, the committee has made it work, on paper at least. According to the charts in the report, raising the homestead cap while lowering the property tax rate would result in lower taxes for some homeowners. But in other cases, the net result would be higher taxes.

In any event, the committee's recommendations still have to go through various stations of the cross - from public comment, to City Council and mayoral approval for some measures, to General Assembly approval of others.

Meaning, as we saw with the O'Malley tax proposal that churned through the State House and came out quite a different beast, we might not recognize it in its final incarnation.

jean.marbella@baltsun.com

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