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Baltimore's population loss should spur property tax reduction

The population decline Baltimore just experienced — 7,346 people lost, 1.2 percent of the population — should be a call to action for city leaders. After a decade of relatively small losses, the city’s population decline since 2015 is decidedly accelerating. When combined with the fact that the majority of residents now rent their homes, we face a grim reality: Fewer people are staying in Baltimore and putting down roots.

Many of the problems driving this loss (crime, racism, classism) are intractable, but there is one problem we can address now: the property tax rate. We often talk about Baltimore’s tax rate when discussing population loss, but usually in terms of its effect on our competitive advantage. The classic argument is that our high property tax drives businesses and homeowners to the county. Less discussed is the impact these high property taxes have on renters and how they reinforce Baltimore’s segregation.

The property tax is supposed to be a progressive, steady revenue stream, sparing the poor and falling on homeowners. In a city with a high poverty rate, where a majority of residents rent, a high property tax rate seems not just sensible, but moral.

The problem with this is that renters are in fact paying the property tax. The legal incidence of the tax (who the government says should pay) falls on property owners; however, the economic incidence (who actually pays) falls to renters, who are charged higher rates by landlords looking to recoup their costs. Worse, with higher property tax rates for non-owner occupied homes, renters are likely to pay more property taxes than owners for the same home.

And there are vast differences between neighborhoods. Sure, the median property tax for the city as a whole is $1,850 per year, but in Canton and Locust Point that bill can easily top $7,000. A hypothetical renter who wants to live in the nicer, growing parts of the city could face over $600 a month in additional, government-imposed housing costs passed on by his or her landlord. For all the talk of equitable development, investment and affordable housing, the city itself makes living in Canton several hundred dollars per month more expensive, which makes lower income developments in the county an attractive alternative for, say, someone looking to get out of West Baltimore.

Older folks and retirees can also find themselves priced out of their own neighborhoods by the property tax. The Greektown neighborhood has seen the median home’s property value more than double since 2000, to $236,500, meaning property tax assessments have also more than doubled for residents living there in that time. That kind of dramatic increase can literally drive retirees and others on fixed incomes from their homes if they haven’t applied for the Maryland Homestead Tax Credit, which limits the increase in taxable assessments each year to 4 percent in Baltimore (and many haven’t).

The typical response to calls to significantly lower the property tax is pretty simple: We can’t afford it. The need for reductions is recognized, but progress is slow and measured in pennies; we simply need the money to pay for services. But there are other ways the city could make up revenue from property taxes. We could increase the local income tax or raise a local sales tax in exchange for similar reductions in the property tax rate. Implementing either would require authorization from Annapolis, but as we already collect sales and income taxes, they would not require significant reorganization. Either would collect significant revenue without adding pressure to housing costs.

Our recent population loss should inspire bold actions. The next mayor faces a real crisis, and their response to our many challenges will determine whether this depressing trend continues or abates. They should, however, start with the low-hanging fruit: if you want people to live here stop pricing them out.

Ted Walsh is a research associate at the Center for Public Policy and Private Enterprise at the UMD School of Public Policy. His email is tedwalsh7@gmail.com.

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