And to think I voted for this guy?
Perhaps Joe Ollinger doesn’t explain his case very well in a recent Letter to the Editor published in the Daily Times, but his contention is that we should gladly pay the nickel per $100 increase in property taxes here because, “in those years that property values decrease, such as this year, to maintain a revenue flow that keeps pace with inflation and population growth, the tax rate must increase by the maximum allowed by the cap.”
But it didn’t last year because his opponent, incumbent County Executive Rick Pollitt, was fretting over his re-election chances. So where was Joe then? Certainly he wasn’t advocating that Rick bleed local property owners dry! Remember, Pollitt was the one who complained for the entire first three years of his term about the cap and threatened to create a “shadow budget” with items he had to cut because revenues weren’t to his liking.
Yet even after the piece in the Daily Times, Joe was at the Republican Club meeting last night handing out a flyer which claimed Pollitt’s proposal to zero out the homestead credit has several “shortcomings.” These are directly from the flyer:
- It is unfair. One group will benefit at the expense of other groups (renters, commercial property owners, future homebuyers, our own children and/or grandchildren)
- It is a subsidy, and as with all subsidies, one group receives an economic benefit to the detriment of others.
- It is not the “American independent – I’ll pay my own way” conservative attitude. Instead, it is a liberal socialist idea that expects a faceless society to pay for a portion of your expenses.
- It will artificially increase the real property tax rate.
- It will artificially increase the personal property rate.
- It is bad for business and economic development.
- It will decrease residential real estate activity.
- It will increase the complexity of the tax code.
I suppose the best way to look at this is point by point. Joe has some good arguments, and some clunkers.
First of all, I don’t care a lot for the emotional appeal of calling something unfair; that sounds like something an eight-year-old would do. While it’s indeed true that the government is using the tax code to promote a certain behavior, I don’t think that a family or a homeowning couple is going to let a tax break of a few hundred dollars over time stop them if they want to move to a better school district, buy a larger (or smaller) home, or pursue a better economic opportunity. Unfortunately, our modern society is littered with these cases where one group has an advantage over other groups; case in point – the home mortgage interest deduction, which is a much larger incentive to buy a home than a minor property tax break.
My thought on point number two (the “subsidy” point) is much along the line of the first item.
But I don’t see where that tax break is such a “liberal socialist” idea – after all, we all want lower taxes. Right now, we have two options on the table: a 10% homestead exemption or a zero homestead exemption. So far, given Joe’s track record of questioning the opposition to a nickel property tax increase (even one which falls within the revenue cap) I wonder why he’s chosen this hill to fight on. No one has yet justified why we couldn’t cut another three percent from our overall budget, which is approximately the amount being discussed.
Since I don’t know whether our current homestead exemption is factored into the existing rates for either property tax or personal property tax (better known as the inventory tax; a tax Wicomico County is alone among Maryland jurisdictions in charging) I can’t rebut or agree with Joe’s fourth and fifth points.
But I do think it’s a stretch to say that a homestead tax exemption change would be “bad for business and economic development.” Perhaps I need some examples of counties which have tried this and how they fared. My guess is that there were a number of much larger factors which had to do with other overtaxation, red tape, and regulation that sent them spiraling downward economically.
I’d also like to see proof of point number seven (“decrease residential real estate activity”) with examples. We’re pretty much at the bottom of the barrel now.
I can agree with Joe’s final point, though. But then again, we should already have a pretty complex system based on the rates in effect when a home was purchased and then increased by the maximum amount when times were good and assessments shot through the roof. Does the 10% increase now in effect take into account all the money “lost” to the county when a property’s value shot up 40 percent but taxes only increased 10 percent? Is there a “catch-up” provision?
For example, take a mythical home assessed at $100,000 in a particular tax year and taxed at $1 per hundred dollars of valuation; their annual tax would be $1,000. The way I figure it, raising the assessed value a year later to $150,000 (assuming the same tax rate) would increase taxes to $1,500 – but under the 10% rule they could only go up to $1,100 because your taxable assessed value only can go up to $110,000. Does the county lose out on that $400 entirely or is that worked into the next year’s tax rate?
The whole idea behind the zero homestead exemption is to have a tradeoff; as Pollitt notes in his budget presentation:
“(I)n return for a slightly higher tax rate, I’m proposing to make sure our home-owning citizens get a permanent tax break starting in fiscal year 2013 to go with the increase.”
Beginning in FY2013, Pollitt wants the amount you’re assessed on to never go up – if your FY2013 assessment is $100,000 that’s where it will stay. But (and this is a BIG but,) that doesn’t mean your taxes wouldn’t increase. Whatever the state determines for “constant yield” and can be slid under the revenue cap, that rate increase will still hit you. Next year it may be a nickel again – or it could be a dime.
Of course, there’s a corollary to this as well – what if assessed values continue to plummet? Does this provision allow you to have a lower assessed value and remain there? We don’t know the answer to that, but there’s a very real possibility we haven’t weathered the real estate storm yet and that this scenario could apply.
The proposal needs to be explained in terms a layman can understand, with real-life examples from counties which have taken the lead in this area.
Julie Brewington has her take on the situation as well.