New assessments bring debate about system's fairness

Political Notebook

January 06, 2008|By Larry Carson

In Howard County, 28,428 homeowners from Lisbon to North Laurel got property tax assessment notices as a New Year's greeting telling them their homes have increased in value an average 24.3 percent since they were last inspected in 2004.

A new round of assessments is a statewide event that stirs political thought about the fairness of the system in which Maryland officials determine a property's value and local officials then decide on a tax rate, modified by an array of state and local tax-credit programs.

There is a new twist this year because of a change in Maryland law in 2007 that requires taxpayers to apply for the Homestead Tax Credit Program, better known as the assessment caps that keep most homeowners' tax bills from rising to the full value of their home's retail worth.

FOR THE RECORD - Correction Last week, the point made by a book on local governments' ability to raise revenue by David Brunori, a George Washington University professor, was misstated in this column. Brunori asserts that in an environment where state and federal governments are making inroads on local taxing authority, the property tax could be the salvation for local governments. Although the property tax is often unpopular, it remains the best way for local governments to collect revenue because it is predictable, Brunori said, adding that the value of property grows without requiring any change in tax rates and the property cannot move away.

Instead of the caps (5 percent in Howard) being applied automatically (except for one year after a home is sold), homeowners must apply for the credit when they get their new assessments notices. Anyone who fails to apply before 2013 loses the credit.

Donald Dunn, a West Friendship resident, retiree and former County Council candidate who was an outspoken advocate of tax credits for county seniors last year, said it is time to re-examine the system.

Although he feels seniors deserve a break on property taxes, he thinks there are too many exceptions given too widely, forcing up taxes for everyone else.

"Property taxes are being abused because they're issuing credits to different types of developments, corporations and individuals under the guise of encouraging them to do certain things that would benefit the county," Dunn said. "It's time to review this whole subject of property tax and look at the credits."

Socialist A. Robert Kaufman, a longtime Baltimore gadfly and candidate for local, state and federal offices, wants to do away with the property tax, replacing the revenues with an expanded, progressive income tax.

Kaufman said property taxes are inherently unfair, because some people live in humble homes but have valuable assets, while others may have a big house, but lost a job or are facing huge medical bills.

"You would be saving a tremendous amount of money on assessments" because the system could be scrapped, he said. "It's far less unfair and just to adjust taxes to people's incomes."

Harold Lloyd, a former state assessments official who lives in northern Baltimore County, has for years helped individual taxpayers fight assessment increases without charge. He advocates eliminating all the specialized tax credit programs, though not property taxes themselves. In addition to assessment caps, Maryland grants credits to lower-income homeowners, and Howard County recently began giving older homeowners additional credits.

"I would get rid of tax credits," he said. "One person's tax credit is another's tax."

Under Maryland's Homestead Tax Credit program, people living in nearly identical houses on the same street often pay different amounts in taxes depending on when the house was last sold.

"You could lower the tax rate for everybody" if some taxpayers weren't paying the freight for others who get credits, Lloyd said. "The more deductions you give for this or that, the more unfair you make the system."

David Brunori, a George Washington University professor and author of a recent Urban Institute-published book called Local Tax Policy: a Federalist Perspective, warns that reliance on the property tax could be the road to eventual fiscal ruin for local governments, which have lost more and more taxing authority to states in recent decades.

Howard County is at the legal limit on income-tax rates, leaving the property tax as the other major source of revenue. Together, the income and property taxes make up 83 percent of all locally raised revenue. Property taxes are about 44 percent of revenue, and income taxes contribute about 39 percent.

Brunori's book says local government control over the tax base has eroded, leaving the unpopular property tax as the major source of new revenue.

Local governments such as Howard have increasingly turned to higher fees, excise taxes, business taxes and state or federal aid, Brunori said.

Howard Levenson, the state's assessment supervisor for Howard County, said he cannot conceive of eliminating property taxes, though all the various credits give him pause, too.

"It's a tax according to value, and it's the fairest way to tax property. But the credits are getting to a point where the values are really irrelevant to your tax bill," he said. "I don't know where this is going to go."

larry.carson@baltsun.com

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