New ideas for cutting city taxes [Editorial]

Our view: Delegate McIntosh's proposals could build on Mayor Rawlings-Blake's reforms to make Baltimore more competitive with the suburbs

February 09, 2014

The last mayoral election in Baltimore featured a spirited debate about a variety of ideas for aggressive reductions in the city's sky-high property tax rate. The winning candidate, though, was the one who called those ideas unrealistic and advocated a gradualist approach that left the basic structure of the city's property tax system intact. To her credit, Mayor Stephanie Rawlings-Blake has followed through and proposed a comprehensive 10-year financial plan to reduce costs, diversify revenue streams and cut property taxes. If all goes according to plan — and that's not certain, since a controversial trash pick-up fee that was part of the equation is now on indefinite hold — she'll knock 22 percent off of the property tax rate.

The bad news is, if all goes according to plan, Baltimore's property tax rate will still be 62 percent higher than the rate in Baltimore County.

That's why we welcome a package of property tax legislation introduced last week by Del. Maggie McIntosh and co-sponsored by nearly every member of the city's House delegation. The bills seek to address some issues the mayor's efforts do not and serve to expand the debate about how to deal with one of the great barriers to Baltimore's resurgence.

One of the reasons Baltimore's property tax rate is so high is that much of the city is exempt from the tax. Non-profits from universities and hospitals to storefront churches pay no taxes on their property. Delegate McIntosh is asking whether all those tax-exempt properties are really being used for non-profit purposes, as required by the law. She proposes requiring non-profits to certify the ownership and use of their tax-exempt buildings, as homeowners recently had to do to maintain their Homestead credits. And she is also seeking to require the state to provide six additional assessors for Baltimore City, in part to determine whether all of the non-profit exemptions are warranted.

The third bill, which requires the Department of Legislative Services to study whether the city's property tax places an equitable burden on homeowners, rental property owners and commercial property owners, should be non-controversial. But the last two bills are a different story.

They deal with the Homestead credit, which is designed to help prevent long-time homeowners from being priced out of their houses because of increasing property tax assessments. The side effect of that program is to create inequities in how much owners of essentially identical properties pay. That's true everywhere but much more so in Baltimore because of the high tax rate. And the city also faces a particular problem in keeping young families who want to move into a larger home, or empty-nesters who have long lived in a big house and want to downsize, because they lose their Homestead credits in doing so and then have to pay full price. That's also true in other jurisdictions, but the presence of suburban counties with much lower tax rates makes it tempting to move out of the city.

Delegate McIntosh wants to create a pilot program to allow city homeowners to transfer a portion of their Homestead credits from one Baltimore property to another for a period of several years to see whether that increases the retention of residents. It's an intriguing idea but one that should be approached with caution. It changes the nature of the Homestead program, and it also would involve some complex calculations for tax collectors. Recent history shows the city and state have not always been good at administering such programs.

The final bill in the package is the one with the biggest potential to change the system. It asks the Department of Legislative Services to study what would happen if the city reduced the value of the Homestead credit while simultaneously cutting the property tax rate. Theoretically, such a move would be a break-even proposition for homeowners, at least in the aggregate, while making it much more affordable for people to move into the city or buy a new home here.

Mayor Rawlings-Blake's reforms are a good start, but to attract new families to the city, more may need to be done. Whether or not Delegate McIntosh's bills turn out to be the perfect solution, they represent a welcome jolt to the debate.


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