Mayor Martin O'Malley made it official yesterday: He's proposing an energy tax on nonprofit organizations and a 20 percent boost in the city's income tax -- both in an effort to raise the money needed to balance his budget.
O'Malley, who had informally discussed his tax-increase plans with council members last week, forwarded two bills yesterday to the City Council, which introduced them last night.
One bill seeks to expand the 8 percent energy tax that is now levied only on commercial businesses. Nonprofit groups are now exempt from that tax, as are manufacturing firms and residents. The first-ever energy tax on entities such as churches, schools and hospitals would raise $4.6 million in the fiscal year that begins July 1.
The second bill would raise the tax on city residents' income, beginning Jan. 1, from 2.54 percent to 3.05 percent, making it among the highest in the state. The increase is expected to raise more than $10.6 million next fiscal year and $16.8 million the year after that.
O'Malley said he thinks the public is willing to pay a little more for a clean, safe city.
"None of us wants to pay more taxes, but none of us wants to live in a city where toddlers are shot in the head by warring drug dealers," he said.
O'Malley has said frequently in recent weeks that it would take a combination of layoffs and tax increases to close what is projected to be a $21.3 million shortfall in his budget for next year.
He said yesterday he plans to lay off 146 workers -- half of the number he initially believed was necessary -- and eliminate 99 vacant positions. Those actions are projected to save about $4.7 million, he said.
A number of council members -- including President Sheila Dixon, who for years has favored an energy tax on nonprofit groups -- have said they support the mayor's suggested tax increases, even though some members have received complaints from those groups about the proposed new energy tax.
There's a sentiment among some council members, however, to shield smaller nonprofits from the proposed tax. Councilman Nicholas D'Adamo Jr., a Southeast Baltimore Democrat, has introduced an energy tax bill similar to O'Malley's, except that it would exempt nonprofits with gross sales of less than $200,000.
"The average citizen in the city is taxed out, and there's a group in the city that's gone without being taxed and that's the nonprofits," D'Adamo said. "But it's not my goal to hit the little guy, that little corner church."
According to the Maryland Association of Non-Profit Organizations -- which is opposing the tax proposal -- 2,500 organizations in the city have tax-exempt status from the Internal Revenue Service. But that does not include the city's hundreds of churches, which are automatically tax-exempt.
Baltimore is the only city in the state that imposes an energy tax on its businesses.
Last year, the tax raised $12.6 million from the city's commercial businesses, according to the Maryland Association of Counties. Allegany, Anne Arundel, Baltimore, Garrett, Montgomery, Prince George's and St. Mary's counties also impose taxes on different types of energy used by businesses.
In other council business yesterday, Dixon introduced a bill that would impose fines of up to $1,000 against residents or companies whose electronic burglar alarm systems repeatedly trigger false alarms.
Dixon said the Police Department receives more than 100,000 false alarm calls a year.