Over the last three years, the value of real estate in Maryland has risen a hefty 20.6%. At some level, that’s good news for existing homeowners and commercial property owners alike, as it means as it means a home or business space they may have purchased several years ago for $100,000 is likely worth about $120,000 today. A rise in equity is what has long made such investments appealing. For many, it’s one of the best they’ll make, often a key steppingstone toward retirement savings. The danger, however, is that with sharp increase in assessments comes the likelihood of much bigger tax bills. Various programs can limit annual assessment increases, but eventually the piper must be paid: With higher assessments comes higher property tax bills for most of us. And given the nation’s uncertain economic circumstances, including rising prices from inflation and the potential for a true recession in the coming months, the timing could scarcely be worse.
That’s why we would call on all those newly elected leaders from Annapolis to Baltimore, and Snow Hill to Oakland, to put a reduction in their property tax rates high on the 2023 agenda. And let’s not go around bragging about “freezing” tax rates: keeping the same tax rate means a major increase in tax bills when assessments spike. No, what’s needed is for mayors, councils, commissioners and the lot to formulate reasonable rate reductions that allow government to meet its obligations — property tax revenue often pays for school construction, for example — without forcing property owners to bear the full brunt of their assessment increases. And it can probably start with incoming Gov. Wes Moore and members of the Maryland General Assembly at least exploring whether the statewide property tax of 11.2 cents for $100 in valuation might be rolled back slightly.
The state property tax may not be the ideal candidate for this, of course. Unchanged since 2007, it already fails to fully cover the cost of state borrowing, and local tax rates are far higher — especially Baltimore City’s, which is about 20 times greater. But even a fraction of a penny would demonstrate that the Democratic majority in the state legislature recognizes the hardship facing homeowners this year and seeks to set an example. Of course, lawmakers can go even further by making sure local aid levels remain sufficient to afford local tax cuts (while still financing long-anticipated Kirwan public school upgrades). And given the state’s budget surplus — $2.5 billion, not counting the $3 billion Rainy Day Fund — even the most cautious state budgeter ought to see the value in that, outgoing Gov. Larry Hogan included.
We would remind Maryland property owners that they have some discretion of their own here. They can appeal assessment increases (normally within 45 days of the once-every-three-years assessment notice), and there are options to do it via phone and video conferencing. It can even be appealed to Maryland Tax Court. And homeowners should take advantage of state programs to lessen the hit from assessment increases — the Homestead Tax Credit, which limits increases to 10% a year; the “Circuit Breaker” or Homeowners’ Property Tax Credit, which provides a measure of tax relief to low-income homeowners; and the Property Tax Deferral, which can benefit eligible seniors. Property owners who want to learn more about them should visit the Maryland Department of Assessments and Taxation website at dat.maryland.gov/realproperty.
Baltimore Mayor Brandon Scott and members of the Baltimore City Council have an opportunity to demonstrate some real leadership here. The city has the state’s highest local property tax rate at $2.24.8 per $100 of assessed value (Baltimore County’s, by contrast, is less than half that). It’s a prime reason there was a petition drive last year to force a 44% reduction in property taxes. Advocates said elected officials had proved themselves incapable of voluntarily reducing the city tax rate. The effort to bring the tax cap to referendum failed, but elected leaders can now prove its advocates were mistaken. The tax rate can surely be lowered — if there is the political will to do so.
And why do it? For the same reason, every jurisdiction should be considering such a move. It’s one thing to tax rising income, it’s quite another to force tax increases on people, particularly seniors and families of modest means living on a fixed income, whose theoretical good fortune doesn’t necessarily translate into cash in hand.
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