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Tax Holiday


Some day, innovation and imagination will replace complacency and compromise in the world of public policy. Great teeth-gnashing and public lamentation accompany the decline in state revenues to Baltimore and the 23 counties. Why not let the city help itself?

The state legislature should give Baltimore a tool to rebuild its economy and induce people to move into the city. Baltimore should offer all individuals and families who move into the city from another Maryland jurisdiction or another state a five-year holiday from state and local income taxes.

That's right. Five years without taxes so long as the individual or family lives at a city address.

No monetary incentive will force people to risk personal safety and move into a blighted neighborhood, so the choice of where the new settler lives to secure the tax holiday should be unrestricted, as long as it is within the city limits. Baltimore has numerous safe neighborhoods with excellent and affordable housing: the rusticity of Poplar Hill, the spaciousness of Windsor Hills, the charm of Fells Point, the high-rise lifestyle along University Parkway, the vitality of Lauraville, the manicured lawns of Ashburton, the lakes of Homeland or the downtown excitement of Harborview. Ultimately, what helps one neighborhood will help the entire city.

Those who would benefit most from a tax holiday, obviously, would be the most affluent -- the group any county or city needs to attract. Taxpayers with adjusted gross incomes of $75,000 pay approximately $4,000 annually in state and local (piggyback) income taxes. Over five years such a taxpayer would save $20,000 simply by moving into the city.

A frequent criticism of city living concerns the public schools. The mayor implicitly endorsed this criticism by enrolling his daughter in private school. Perhaps, then, families with school-age children would not be lured into the city.

But census data show that most households do not include school-age children. The city should forget trying to market itself to the family with 2.3 kids, station wagon and golden retriever. Such families are not economical for a city, anyway. They use schools, produce lots of garbage and pollute the air with too many vehicles. The so-called "typical" family costs local government more than it contributes.

But an entire universe of young singles, empty nesters, divorcees, marrieds without children and seniors could be attracted to Baltimore. The tax-holiday plan will work if directed toward the majority of households that do not use the public schools.

Let's look at the advantages:

* Demand for city housing would increase, causing property values to rise and increasing property-tax revenues. This in turn could permit the city to lower its extraordinarily high property-tax rate.

* Residential construction and renovation would be rejuvenated, along with related construction, banking and home-furnishing businesses.

* People moving into the city would contribute to the overall fiscal health of the community by being producers and income earners rather than people who only siphon off municipal services.

* Any influx of relatively affluent people would have a natural spillover into the commercial sector, boosting local retail and services businesses. The consequences of prosperity would swell federal, state and local tax collections.

* The city's self-pride would grow, as its own residents and residents of nearby counties saw it doing something for itself, rather than merely asking for handouts.

Cities have always recycled themselves. Any influx of affluent residents into Baltimore will generate positive momentum. A tax holiday would give Maryland residents and those who would move here from other states good reason to make Baltimore home.

NB Richard S. Hollander is president of Millbrook Communications.

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