Here's a riddle for you: When is a tax cut not a tax cut? Answer: When it happens during a contentious Republican primary race for Anne Arundel County executive.
The current executive, Laura Neuman, proposed her budget for fiscal 2015 last week, and it includes a very modest reduction in Arundel's property tax rate, from 95 cents per $100 in assessed value to 94.3 cents. Her primary opponent, Del. Steve Schuh, dismissed talk of a tax cut as "misleading," arguing that she is doing no more than complying with the requirements of Anne Arundel's strict property tax cap.
He's certainly right about the last part, but he's wrong if he's implying that she should have done anything different. Anne Arundel County already has the lowest property tax rate in the Baltimore region, not necessarily because its leaders have been diligent in reducing it but because they have been forced to as a result of a voter property tax revolt in the early 1990s. An executive who tried to do more than the tax cap already requires would only cripple herself and her successors for years to come.
To see why, it's important to understand how Anne Arundel's tax cap works. The 1992 charter amendment approved by voters stipulates that the total amount Arundel collects in property taxes on existing properties cannot go up by more than 4.5 percent in a year or the rate of growth in the Consumer Price Index, whichever is lower, and during the last 20 years, the CPI has always been lower. Any new construction that occurs during a budget year doesn't count against that year's cap, but its value gets baked into the base for the next year.
The CPI grew by 1.89 percent during the past year, but assessment growth was 2.65 percent, so the 0.7-cent cut was necessary to meet the terms of the cap. Individual property owners may see their bills go up next year despite Ms. Neuman's cut in the rate, depending on whether their assessments are rising. Her action hews to the policy Anne Arundel executives have followed almost without exception since the tax cap went into effect and the one the county uses in its pitches to bond ratings agencies, which is to do precisely what the 1992 voter referendum allows, no more and no less.
To cut more than the cap requires — something Arundel executives have proposed only twice since the cap went into effect, perhaps not coincidentally during election years — means foregoing revenue forever. If circumstances change the next year or five years later, the executive can never raise taxes to make up for what was lost.
That presents a real problem based on the state's mandates for local education funding. In a nutshell, the state requires counties to spend at least as much per pupil each year as they did the year before under the "maintenance of effort" law. Counties can seek waivers from that law under extraordinary circumstances, but they are rarely granted, and Anne Arundel County is not a likely recipient for one. From the state's perspective, it is a wealthy county that has chosen to limit its revenue both through the tax cap and its decision to keep its income tax rate at 2.56 percent, well below the state maximum of 3.2 percent.
The combination of the tax cap and maintenance of effort means that an ever-larger share of the county budget goes to the schools. Ms. Neuman proposes a $1.3 billion budget for next year, fully $600 million of which goes toward K-12 education. If she were to propose a property tax cut greater than required by law, that money would have to come from somewhere, and the next biggest chunks of the budget go for police and fire protection.
Ms. Neuman was right to raise property taxes last year when the cap allowed it, and she's right this year not to cut them any more than the cap requires. It may not excite Republican primary voters, but it's the prudent thing to do.
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