Baltimore's tax diet

Our view: A 2-cent cut in the property tax rate may not seem like much, but if it's the first step in a long-term strategy, it could be huge

May 07, 2012

Those who wish to lose weight — and with summer swim season around the corner that's probably most of us — know that there are two easy ways to sabotage one's diet and exercise program. The first is to try to do too much all at once and fail, and the other is to say it's all futile and just keep doing what we've been doing.

So it's not terribly surprising that Baltimore's property tax reduction program approved last Monday by the City Council is receiving a similar reception from those who either believe the city can't afford it or claim it's just not enough. In the weight-loss world, these are called diet saboteurs.

Here's one thing we can all agree on: Nobody is going to get instantly rich off the 2-cent property tax break that's set to go into effect on July 1. The move will reduce the city's current rate of $2.2688 per $100 of assessed value by about eight-tenths of 1 percent. It amounts to a savings of $40 for those living in a house worth $200,000.

That's no game-changer. And it makes MayorStephanie Rawlings-Blake's goal of bringing the city's tax rate into something more competitive with surrounding counties seem pretty distant. Most have rates hovering around the $1 mark.

But the secret to any successful diet is to set reasonable goals and then stick to them over the long haul. The city's plan anticipates similar down-sizing annually for the next several years, with the goal of providing homeowners with a $400 break in their tax bills by 2020.

Some, like veteran council member Mary Pat Clarke, see this as a bad choice. Next year's tax break translates into $3.8 million less in city spending, which is tough for a community facing such unpleasant budgetary choices as closing fire stations and recreation centers.

Others, like Christopher B. Summers of the Maryland Public Policy Institute, view Baltimore's plan as "one of the weakest attempts at cutting property taxes in the Northern Hemisphere." He would rather the city made a much more dramatic move on the theory that property values would eventually rise and offset much of the lost revenue.

Perhaps that might work. But no community voluntarily takes that kind of risk. An incremental approach can be like the Colorado River: It may not cut through a lot of rock in any given year, but eventually, its ceaseless efforts create the Grand Canyon.

And while we sympathize with Ms. Clarke, her thinking is far too short-term. Until Baltimore corrects its property tax situation, the city will be perpetually facing unpleasant choices and sacrifices. Only when middle-class and more affluent people find the city a good place to live and then choose to move here (or stay here) will its long-term financial future be more sound.

Admittedly, it's not hard to find reasons to keep the status quo — particularly in these economically uncertain times. Today it may be a fire station on the chopping block. Tomorrow, it could be a pool or even a school that is slated to be closed.

That's just one reason why Mr. Summers and others question Baltimore's resolve. The mayor plans to "pay" for the tax cut through revenues from a slots parlor that hasn't even been built yet. What happens if it isn't — or if the casino performs below expectations?

While we believe the slots parlor will be built (and is likely to be successful), Baltimore should stick to its budget "diet" regardless. It isn't a question of sacrifice, but just the opposite. Once the tax rate drops sufficiently, property values are bound to rise, and the real estate market will become more robust. That will not only generate more property tax revenues but boost the economy and create jobs, which is what the city needs more than anything.

That's not just wishful thinking. It's how markets work. But only if the city sticks to the plan. Tiny tax break by tiny tax break, Baltimore can drop its excessive tax rate. And that approach doesn't preclude more aggressive action if the city can find a way to manage it without putting core services at risk.

By itself, next year's tax break is meaningless, a couple of fast-food lunches for the family. But in the context of growing the city's tax base, it could be super-size — the first step toward a more prosperous and sustainable Baltimore.

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