No tax relief this year

Our view: City has to get serious about tax reform

April 27, 2008

People sitting comfortably at home in Baltimore, paying their mortgages monthly, may feel no connection to the subprime mortgage crisis. But it just cost them a cut in the property tax rate.

Faced with budget shortfalls, Mayor Sheila Dixon has decided against shaving 2 cents off the rate of $2.268 per $100 of assessed value as part of the five-year plan to lower the rate by 10 cents. But the mayor made the wrong choice: She should have withheld cost-of-living raises for city workers and delivered some tax relief. That's what Baltimore County Executive James T. Smith Jr. did to offset expected revenue losses.

To be sure, tough times require tough measures. The collapse of the housing market and the decline in home sales in Baltimore have cost the city money it can't easily recoup. The budget surpluses of recent years were the direct result of robust home sales and the accompanying increase in recordation and transfer taxes paid. But those increases have vanished as housing sales in the city have declined, 21 percent last year and 11 percent in 2006.

Cutting the tax rate would have cost the city $5.3 million in revenue. The mayor wanted to use that money to keep senior citizens working in schools, provide summer jobs for teens, shore up libraries and staff an emergency homeless shelter. Those are worthy efforts, but if the city is ever going to get competitive on its tax rate, the commitment to drive it down must be consistent. As it is, the five-year plan was a gradual, responsible way to cut the rate in an effort to attract and retain businesses and residents.

The mayor and City Council, which like to spend the city's surpluses, have to get serious about tax reform. The recommendations from a mayoral task force have generated little discussion, much less serious debate. Some people, in and out of City Hall, are betting on slots to fund long-term tax relief for city residents. That's a gamble. The projected $50 million a year in revenue from a slots parlor would enable the city to cut its tax rate by 17 cents, but to maintain that rate, the city would have to receive as much in slots revenue every year. What are the odds of that? More to the point, it doesn't resolve the city's basic problem - relying too heavily on property taxes to fund its operations.

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