Montgomery County Executive Marc Elrich said Monday that his proposed budget for the next fiscal year won’t include a tax increase.
Elrich told the District 18 Breakfast Club on Monday morning that there won’t be a tax increase in his recommended fiscal year 2022 budget.
His proposal is expected to be released on March 15.
“All these things have come together to a place that we can manage this without a tax increase,” Elrich said. “Income taxes are OK. Actually, they have not been bad at all.”
When the state released some income-tax projections in May, Elrich said, he thought they were wrong because they neglected to factor in that unemployment was taxable and there was a $600 federal bump to paychecks.
The extra federal payment had people making more money than they were making when they were employed, Elrich said.
“It was going to lead to more money coming into the state and we weren’t going to get hit as hard as we thought we were going to get hit. That proved to be true,” he said.
The biggest concern is commercial property taxes, which are based on an income method, Elrich said.
“If their incomes go down, their taxes go down and the problem with that is that it lasts for the entire assessment cycle of three years,” he said. “So you could lose a tenant and go in and file for reassessment and get a major reduction based on your reduction income. You could get new tenants in three months later, and you’re still taxed at the lower rate for the remainder of the period, which could be as long as three years.
“We would like to have a more fair system so you benefit when you go down — and you can benefit apparently instantly when you go down. We should be able to restore taxes when the occupancy increases again,” he said.
There were a few glitches, though, Elrich said.
Maryland’s Relief Act of 2021 repeals state and local income taxes on unemployment insurance benefits for the 2020 and 2021 tax years for claimants who have a federal adjusted gross income of less than $75,000 for individuals, or $100,000 for married couples filing jointly.
That tax relief will result in $400 million saved for unemployed workers, but will cost the county “north of $30 million, probably,” Elrich said.
“People who work and make the same amount of money are being fully taxed. So, I’m not sure why you wouldn’t tax one person for the same amount of income that the other low-income person is taxed for,” he said. “It would be nice if — and I don’t think this is a wrong thing to do — to rip the bandage off and let us have a progressive tax system in the state, so folks can actually have graduated income taxes and people at the bottom don’t have to pay so much.”
The county’s income tax rate is 3.2%.
A state bill that would have allowed the county to increase the income tax cap to 3.5% was amended to take out that ability.
Last year, Elrich proposed the fiscal year 2021 with a roughly 5-cent tax increase — most of which would go to the public school system through a special 3.18-cent supplemental property tax. The County Council rejected the tax increase.
The council approved a new weighted average property tax rate of 97.85 cents per $100 of assessed value — a decrease of a hundredth of a penny from the previous fiscal year.
The income tax offset credit — provided against the county’s real property tax rate to offset increases of more than 2.6% of the county’s income tax revenues — was set at $692 for the current fiscal year. Elrich had proposed a credit of $800.
Briana Adhikusuma can be reached at firstname.lastname@example.org.