A bold step needed on Baltimore's property tax

There is no debating the fact that Baltimore's property tax rate puts it at a major competitive disadvantage with the surrounding counties. The rate in the city is $2.268 per $100 in assessed value, more than double the rate in Baltimore County — which is itself higher than the rates in Anne Arundel, Carroll, Harford and Howard counties. Even with the recent improvement in the city's schools and crime rate — two other big historical advantages for the suburbs — the property tax is a powerful incentive for families to leave the city or to choose another jurisdiction when they move to the area. Efforts by former mayors Martin O'Malley and Sheila Dixon to shave a few cents off the rate made little difference, and even the most optimistic projections for the revenue Baltimore might get from a slot machine parlor wouldn't come close to changing this dynamic.

Yet, when a Baltimore elected official, City Councilman Carl Stokes, proposed doing something about that Monday night, the rest of the powers that be in City Hall acted like he was crazy. A spokesman for Mayor Stephanie Rawlings-Blake called the proposal unrealistic. Councilman Nicholas D'Adamo said it was a "tooth fairy plan." Councilman Warren Branch, who had initially been supportive of the idea, ran away as soon as he heard the details.

Maybe the idea Mr. Stokes is proposing is crazy. But continuing to do what Baltimore is doing — a course that led to another 30,000-person drop in population during the last decade — is crazy, too.

Mr. Stokes, who is contemplating a run for mayor, introduced a charter amendment that would require the city to cut its property tax rate by more than half within five years. If placed on the ballot by the City Council, it would go before the voters this fall. If they approve it, the legislation would force the city to lower its rate by 15 cents per $100 in assessed value for four straight years and then by another 46.8 cents in the fifth year, bringing the levy down to the $1.10 per $100 rate now in effect in Baltimore County. The idea is that by rapidly lowering the rates, more people will move into the city, the property tax base will increase, Baltimore will collect more in income and other taxes, and any lost revenue will be quickly recouped.

That may sound too good to be true, but there is at least some evidence that it could work. The plan is a variation on an idea proffered recently by Loyola University Maryland economics professor Stephen Walters and Calvert Hall teacher Louis Miserendino, who argue that the gradualist approach to property tax reduction would only prolong Baltimore's pain, but a quick cut would result in an immediate increase in Baltimore's population and tax base. They point to the experience of other major cities — notably, San Francisco and Boston — that were forced to make similar, or even greater, reductions in their property tax rates in the 1970s. In those cases, Messrs. Walters and Miserendino write in The Maryland Journal, the effect was so strong that tax revenues returned to and far exceeded their previous levels within about four years.

Those situations were a little different than the one facing Baltimore. For one thing, both moves were the result of statewide property tax revolts, which are unlikely in Maryland since all the other jurisdictions' rates are already so much lower than Baltimore's. And in the case of San Francisco, the city was helped in its transition by an infusion of cash from Gov. Jerry Brown. He sent the city $100 million, the equivalent of well over $300 million today, something that's a virtual impossibility given Maryland's fiscal situation, not to mention the politics of asking residents of Maryland's other counties to subsidize Baltimore's entirely voluntary experiment with tax reform.

Instead, Messrs. Walters and Miserendino call for Baltimore to pass a charter amendment announcing it would adopt a new rate at or slightly below Baltimore County's four years hence. They believe that the requirement of a date-certain cut in taxes would have an immediate effect as investors and homebuyers snapped up properties, and they call for the increase in revenues from transfer taxes, increased assessments and income taxes to be put away in a proverbial "lock box" to cushion the transition.

There are a lot of questions about the idea, not the least of which is whether people really would flock to the city on the promise of a tax cut in four years, or whether the population rebound here would come as quickly as it did in Boston and San Francisco. To make the math work, Baltimore's population increase would have to be massive — some 33,000 people a year for four years, according to calculations from the mayor's office. To put that in context, the entire state of Maryland averaged growth of about 48,000 people a year during the last decade.

Mr. Stokes' variation on the plan, which spreads the cut out over five years rather than doing it all at once, also comes with some major unanswered questions. Each 15-cent cut in the rate would cost Baltimore more than $44 million in revenue, and Mr. Stokes' legislation doesn't spell out where he would get the funds to make up for it during the transition period. He has offered a series of suggestions for eliminating incentives and breaks currently written into the tax code, among other things, but as yet he is able to offer nothing better than an educated guess as to their impact.

For all those reasons, we can't at this point endorse the plan — either Mr. Stokes' version or the Walters-Miserendino one. But the knee-jerk dismissal the ideas are getting at City Hall is wrong. Of all the things holding Baltimore back, there is only one that the City Council and mayor could change with a stroke of the pen, and that is the property tax rate. Mr. Stokes and the other possible challengers to Mayor Rawlings-Blake are right to push for the city to take a bold step to reduce that burden. This exact approach may not be the right one, but it's a debate worth having. Now that Mr. Stokes has put the idea on the table, it's up to his critics to prove he's wrong — and to come up with a better plan.