While any discussion of tax policy in this country takes place in the long shadow of the reality that this is a nation established, to a large degree, because of a dispute over paying taxes, certain understandings were in place throughout the 1900s that allowed for tax money to pay for a fine public education system, as well as many other locally-funded public amenities.
Key among the tax policy understandings that allowed for the development of a prosperous nation was that owners of large amounts of land would end up paying high tax bills, even if they consumed relatively little in the way of public services.
Exelon Generation and other public utilities are extreme examples of the logic behind the system and why it evolved. By virtue of owning substantial acreage for generating facilities, electric transfer stations, power and gas lines and any number of other bits of land, not to mention substantial amounts of heavy equipment that is subject to business taxes, power companies and similar utilities generally pay the biggest single real estate tax bill in whatever counties they happen to be doing business in.
Conversely, power companies consume relatively little in the way of public services. They have no children to send to schools. They don't need parks. They rarely need police protection. The occasional fire emergency has to be addressed, but given the volume of wires and pipes associated with a power company, the need for such services are very small.
Consider that Harford County's total tax revenue from all revenue sources was $625.7 million. The three corporate entities associated with gas and electric in Harford County paid $11.5 million of that total. Property taxes on most single family homes, meanwhile, are in the $3,000 to $5,000 range.
To bring it into sharper focus, Exelon paid $1.27 million in taxes during the 2013 fiscal year on its Perryman electric generating plant. The value of that facility is poised to increase substantially when two new turbines are completed at an estimated cost of $122 million.
Historically, tax revenue from businesses like power companies has been used to subsidize services consumed by people who live in single family homes. Even as power companies make relatively little use of public services, a family of four with two kids in public schools paying that hypothetical $3,000 to $5,000 a year in real estate taxes consumes substantially more than $5,000 just in school costs, which are well in excess of $3,000 per pupil.
The examples aren't necessarily linear, as the family of four also is probably subject to county income taxes, and the school system receives roughly half of its funding from the state. The larger point, however, is homeowners generally consume more in services than they pay in taxes. This is made possible thanks to the likes of the power companies, and other businesses, that pay large property tax sums but demand relatively little in return.
Starting in the 1980s, a movement began to gather steam in certain circles in corporate America. Large business entities that employ large numbers of people realized that the argument could be made in the public forum that they consume few services, employ a lot of people and therefore are worthy of tax breaks.
By the 1990s, it had become fairly commonplace for large corporations planning to build new facilities to shop their proposals around and locate where they could secure the best tax deal and still be close to roads, rails or harbors, as needed.
The promise of bringing jobs to the community has generally trumped any desire to retain the old social compact of businesses paying more even as citizens have paid less for public necessities. In Harford County, the result has been the addition of a fair number of businesses — and the associated jobs — that may well have gone to another location with a sweeter tax deal. In some cases, when the sweet deal in Harford expires, the firm in question moves on to a new sweet deal.
It must be noted, however, that Harford County has seen the tax burden increased on the citizenry. Going back a little more than a decade, the county's income tax rate was increased to the point of being one of the highest in the state. While real estate tax rates have not changed, assessments have gone up substantially, thanks to market forces, so the average household pays bills that are much higher than they were a decade ago. Similarly, power companies and a few other businesses have not been the beneficiaries of such breaks.
Taxes have paid for many of the things that have made this country great, and local property taxes are an important source of tax money. It doesn't necessarily matter if this money comes from homeowners, to the benefit of big businesses, or the other way around, but as a community it is important to have a clear understanding of the issues at play and make the decisions based on that understanding.
After all, unlike in 1776 when there was taxation without representation, in our era, tax policies are made by people who answer to those of us who vote.Copyright © 2015, The Baltimore Sun