Poverty and property taxes

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The Baltimore Sun
By: Dan Rodricks
December 20, 2011

Poverty and property taxes

Here's the biggest reason Baltimore's property tax rate is the highest in the state and twice that of the surrounding counties: We have most of the region's poor people. About one in four Baltimore residents is officially poor, according to the U.S. Census Bureau.

From 2006 through 2009, Baltimore's poverty rate was around 20 percent. But the Census Bureau's survey for 2010 put the rate at 25.6 percent. And that being 15 percentage points higher than the poverty rate for Maryland, and poverty being related to a thorny array of other problems, it follows that taxes would be higher in Baltimore.

Some people seem to see nothing but the Canton waterfront or the lovely, tree-lined streets of Roland Park. I visited the new Harris Teeter store in Locust Point the other night, and it was fabulous, situated in a redeveloped area a few blocks from Under Armour's headquarters. It's great, it's upscale, but it's an alternate universe from the large tracts of city inhabited mainly by poor families.

Lester Spence is an assistant professor of political science at the Johns Hopkins University, and though he's been here a few years, he still regards Baltimore as an outsider. He was amazed at what became the top issue in the summer's mayoral campaign. "The central issue was property tax abatement," Mr. Spence blogged in October. "The poverty rate for female-headed households in Baltimore is 40.6 percent. The poverty rate in general is at least [25] percent. ... Many Baltimore residents are unemployed and struggling. And the most important issue ... was the property tax?"

It's true, property tax abatement is relevant primarily to those who pay property taxes. Property taxes are high in Baltimore because the tax base is the leanest in the state. Homeownership in Baltimore is little more than 50 percent, says the census. Statewide, it's 65 percent.

So we have a lot of poor people, not enough who can afford their own homes, or too many who lost theirs during the housing bust and foreclosure crisis. Those who own property have to be taxed at a higher rate -- about twice the prevailing rate in the suburbs -- to make up the difference and keep the city running.

Lester Spence is correct about property taxes being an issue of prime concern for those fortunate enough to own a house. But he's wrong in suggesting that those who don't shouldn't be concerned about it.

People who pay property taxes foot the bill for police officers, firefighters, schools, trash collectors and all other city services. If the city doesn't keep present homeowners and recruit new ones, the quality of life will further erode, and then what?

So it's a good thing that the property tax rate, at long last, came front and center in a mayor's race. It's equally good that this newspaper assigned reporters Scott Calvert and Jamie Smith Hopkins to look at something called the Homestead Tax Credit, which has been around since the late 1970s, a creation of the Maryland General Assembly and in place throughout the state. The tax credit provides a cap on tax bills; in Baltimore, they can't grow by more than 4 percent a year, even if your house grows in value many times that. The idea was to keep people from being tax-shocked out their homes across the state, and that was an acute concern in Baltimore as property values grew during the Schaefer-era renaissance.

But as the Sun's report shows, more than three decades later, the tax credit has a legacy of debatable value: It has resulted in huge breaks for certain homeowners and an uneven application of taxation.

The city and state ought to decide whether the Homestead Tax Credit makes sense in Baltimore in the 21st century, or whether it needs to be adjusted in a way that opens the door for more people to consider buying a house here. Same with the tax rate; after all these years of nibbles, we ought to strive to take a bigger bite out of it, certainly bigger than the one Mayor Stephanie Rawlings-Blake proposes, in a way that makes a bold overture to prospective homeowners.

All good. But getting people out of poverty and into their own homes -- that remains the biggest challenge of all.

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This page contains a single entry by CFED published on December 21, 2011 3:39 PM.

Sarah Rosen Wartell, Think Tank Executive and Housing Finance Expert, to be the Urban Institute's Third President was the previous entry in this blog.

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