"The homestead tax credit is critical in maintaining homeownership in the city, and in the context of the city's high tax rate is probably to be considered good public policy," Basu said. "But the overall tax code itself is not good public policy in part because it creates massive disparities."

Like others, Basu suggests raising the tax cap while at the same time lowering the overall rate.

"I suspect that many taxpayers would exchange a 5 or 6 percent limit on the annual increase in taxes in exchange for a lower property tax rate," he said. "The point is, you could reduce the city's property tax rate and be revenue neutral."

Rosenberg doesn't want to scrap the cap. He said it's been a life-saver for retirees in gentrified neighborhoods such as Locust Point, where home values shot up during the last decade. "You don't want a reform that is harmful to people who, very legitimately, the cap was designed to protect," he said.

Rosenberg acknowledged the political challenge of passing any changes in Annapolis that would require some owners to pay higher taxes. "There will be people who are benefiting from the current system who will oppose it," he said.

Then there are the logistical issues raised by Young, the state assessments chief.

Part of the problem with an income-based program is that homeowners would have to wait to apply until they filed their income tax returns, and his agency would need to process all that paperwork before property tax bills go out in July.

The state would also have to spend more to print and mail application forms to homeowners, such as senior citizens, who aren't able to access them online, he said. And some homeowners might balk at sending in a copy of their tax return in order to receive a property tax credit, he said.

On the other hand, Young said, tying the homestead credit to income could resolve long-standing questions about its legality. The state attorney general's office has consistently said the current structure of the homestead program violates the state constitution, which promises "uniform" taxation.

"The courts have ruled that if you bring an income component into a tax-credit program, it's constitutional," Young said. "In other words, you don't have to worry about Maryland's uniformity clause."

Joan Youngman, a senior fellow at the Lincoln Institute of Land Policy in Cambridge, Mass., said Maryland's homestead credit and its effects in Baltimore offer a classic example of how fixing one problem can lead to others.

"You put in things with the best intentions and it can lead to so many unintended and perverse consequences," she said.

It's not just that the homestead credit pits longer-term homeowners against newcomers. It also pushes more of the tax burden onto renters, who live in properties that aren't eligible for the tax break.

Massachusetts offers an alternative way to temper tax increases. The state's Proposition 2½ — approved by voters in 1980 during a tax revolt — caps the amount that local governments can raise from property taxes, by limiting the total increase in revenue drawn from the existing property base to 2½ percent a year. Local governments can override the limit only if voters agree.

It's a workable system, Youngman said, one "definitely worth considering."

"The property tax is always such a target that I would never say people are happy or even satisfied," she said. "But I would say people understand it, and we have been able to deal with it."

scott.calvert@baltsun.com

jhopkins@baltsun.com

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