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Regional, commuter taxes could bolster city finances


LISTEN CAREFULLY over the next two months to see if gubernatorial candidates Lt. Gov. Kathleen Kennedy Townsend and U.S. Rep. Robert L. Ehrlich take a position on tax changes that could benefit Baltimore.

Changes like a small commuter tax on Marylanders who work outside the jurisdiction where they live. Or a modest regional sales tax to support cultural institutions and provide tax relief to poor communities.

The former could mean about $32 million for the city's coffers; the latter measure, more than twice that amount.

These are among some of the more intriguing figures in a new report from the Johns Hopkins Institute for Policy Studies. Titled "Alternative Revenue Sources and Structures for Baltimore," the $20,000 study was initiated by the Baltimore Efficiency and Economy Foundation and funded by the city and the France-Merrick and T. Rowe Price foundations.

Make no mistake, the city needs new sources of funds. As the report puts it, the city's income and property tax bases are "anemic," notwithstanding recent signs of urban resuscitation.

"I'm amazed that the city continues to balance its budget every year," Marsha R.B. Schachtel, the report's lead author and a senior fellow at the institute, said in an interview this week.

The report is not limited to identifying revenue sources that require action by the state.

The report says if Baltimore increased its utility taxes to the point where they generated the same percentage (4.9) of municipal revenues as the average big city, it would get about $43 million a year, compared with $25 million a year now.

It notes previous studies that suggest millions more could be generated by higher fees for electric, telephone and cable companies that use the city's underground conduits and says a tax on cell phones - assessed separately or as a piggyback on the state tax - could generate appreciable revenues.

And the report says it may finally be time to explore having developers along the waterfront share the cost of infrastructure by imposing impact fees, similar to those used by Anne Arundel, Carroll and Montgomery counties.

"Instead of imposing such fees, city officials, long accustomed to stimulating the weak market in other parts of the city, have been providing waterfront developers with a variety of incentives," the report states.

The report is not Pollyannish about the prospects of passage of the commuter or regional sales tax, both of which would require changes in state law and have been floated before. It calls them "most difficult to implement."

But it notes that the Pittsburgh area has a regional cultural tax, and that Pennsylvania and Ohio allow localities to tax nonresidents who work there. And it argues that over the last decade "significant commercial development in suburban counties have made them less 'bedroom' communities and less likely to experience dramatic losses" if such a law were enacted.

To deal with what it calls the "D.C. Issue" - the fear that the District of Columbia would tax Maryland residents working in Washington if Maryland had a commuter tax - the report suggests that out-of-state residents should not be taxed unless their states taxed Maryland residents.

Maryland residents who paid an earnings tax where they worked would receive an equal credit against taxes where they lived. Although individuals wouldn't have to pay more in taxes, some jurisdictions would gain money while others would lose.

According to the report's analysis, a 1 percent earnings tax would result in a net gain to the city of $32 million a year.

Baltimore is one of seven jurisdictions statewide that would benefit from such a tax, according to the analysis.

Montgomery County would stand to gain the most by such a tax, at $38 million. Howard County would gain $3.2 million and four counties on the Eastern Shore - Kent, Talbot, Wicomico and Worcester - would each gain less than $1 million.

The biggest losers would be Baltimore County, $17 million; Harford County, $13 million; Carroll County, $10 million; and Anne Arundel County, $9 million.

A 1 percent regional sales tax designated for cultural activities and tax relief would likely be less controversial than a commuter tax - and more beneficial.

Based on the Pittsburgh area model adopted in 1994, where there is a 1 percent regional sales tax, the city could stand to gain $76 million.

Of that, $28 million would come in savings from money the city currently allocates to such regional cultural attractions as the Baltimore Museum of Art and Center Stage and the rest would be in the form of tax relief for poorer residents.

In all, the report estimates that the regional sales tax would generate an estimated $215 million - leaving plenty to support such county attractions as Oregon Ridge Nature Center in Baltimore County.

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