The Montgomery County Council on Monday voted to oppose two bills in Annapolis that would let counties create tiered rates for property and income taxes.
House Bill 1276 would give counties the authority to set a progressive property tax rate, with owners of homes of at least 5,000 square feet paying higher rates. It would also apply to commercial and industrial properties.
The county would have the authority to set different tax rates for some residential properties, such as apartments and condominiums. The bill is sponsored by Del. Julie Palakovich Carr, a Democrat who represents Rockville and Gaithersburg.
House Bill 1494 would let counties set up a tiered income tax structure, with those earning more paying higher rates. It would also raise the maximum income tax rate allowed in a county from 3.2% to 3.5%.
The bill is being sponsored by Baltimore City Del. Nick Mosby, a Democrat. Palakovich Carr is a co-sponsor.
Palakovich Carr and County Council Member Will Jawando held a press conference Monday morning urging support for both bills. The income tax bill, Jawando said, would raise revenue for needed education funding based on recommendations from the state’s Kirwan Commission.
The Kirwan Commission, known formally as the Commission on Innovation & Excellence in Education, has recommended $4 billion in additional annual spending for increasing teacher salaries, expanding early childhood education and adding more counselors. Local governments would be responsible for $1.2 billion of this annually total, with Montgomery County spending roughly $260 million more annually by fiscal year 2030, starting in fiscal year 2022.
Democrats in the legislature have been working on ways to raise billions of dollars for the education plan. One proposal has been to lower the current sales tax rate, but expand it to apply to most services.
Jawando’s office estimated the property tax legislation would mean a tax cut for 98.5% of homeowners in Montgomery County, based on data from the county’s planning and finance departments.
But the County Council voted after the press conference to oppose both measures because of concerns that higher tax rates could drive businesses from the county. As local officials, the bigger priority should be growing the tax base, opponents of the measures said.
Jawando, during Monday’s press conference, said the income tax bill could hypothetically raise more than $88 million per year if residents making more than $1 million per year were subject to the rate hike.
The property tax bill, Jawando said, has no effect on revenue and wouldn’t help pay for the Kirwan plan. But he said it is important as a matter of fairness to Montgomery County homeowners, 23% of whom spend at least one-third of their income on housing.
“Our flat property tax is a contributor to this imbalance,” he said.
Palakovich Carr echoed those comments.
“We have a system that provides [that] the wealthiest 1% of Maryland taxpayers pay the smallest share of their income in property taxes relative to the rest of us, and that just isn’t a fair system,” she said.
Jawando said both bills benefit teachers.
“We need to fund recommendations that will give them [teachers] higher pay, and at the same time, if we can provide a property tax cut, that’s gonna be a double benefit to working class folks, and teachers in particular among others,” he said.
The council voted 6-3 to oppose the property tax bill. The votes against were by Council Members Andrew Friedson, Gabe Albornoz, Sidney Katz, Nancy Navarro, Craig Rice and Hans Riemer. Jawando, Evan Glass and Tom Hucker supported the bill.
Many of the bill’s opponents on the council cited concerns about the possibility of stifling economic development.
“I think this will really undermine our efforts on the council to work on our economic competitiveness as we talk about raising our property taxes on our properties,” Friedson said.
“We have to remember that we’re not Congress. That we’re not doing national policy here, that these are local policies with regional consequences and we are competing with our counterparts in D.C. and across the river [in Virginia].”
Albornoz said Jawando’s and Palakovich Carr’s advocacy of the bill was thoughtful, but higher property taxes could become “another talking point” for businesses as to why they shouldn’t settle in Montgomery County.
Albornoz cited a recent report that Prince George’s County is outpacing Montgomery County in job creation.
“I don’t think this bill at this time helps us in that regard,” he said.
The council voted 6-2 to oppose the income tax bill. Friedson, Albornoz, Katz, Navarro, Rice and Riemer were opposed. Jawando and Hucker were in favor. Glass abstained, saying he would have preferred the council not take a position.
Rice said he prefers the proposed expansion of the state’s sales tax to include professional services as a way to pay for the Kirwan plan. Rice served on the Kirwan Commission.
“A tax on sales is incredibly progressive. A tax on services is incredibly progressive,” he said.
Riemer said he thought it was “very premature” for the county to devise a strategy to pay its share toward the Kirwan recommendations, since the share could change.
Glass agreed that the income tax bill was premature, but said he didn’t want the county to take a position.
“I would prefer that we took no position given the fluid nature of these conversations rather than come out of the gate being opposed to this quite frankly,” he said.
Proposed tax hikes have encountered opposition from several area chambers of commerce.
The Montgomery, Greater Bethesda, Greater Silver Spring, Gaithersburg-Germantown and Rockville chambers of commerce were among multiple organizations that sent a letter to Ways and Means Committee Chair Anne Kaiser (D-Montgomery) expressing concern about the tax hike bills, although none was named specifically.
“It is our shared position that increasing taxes on businesses and individuals will make Maryland less attractive to future investors and retirees and will threaten the growth of a broader tax base as taxpayers seek more advantaged communities,” the letter says.
“Funding important priorities, like education, requires sustained robust economic growth. As your respective committees hold hearings on these bills and discuss ways to fund education, we should be supporting policies that attract additional investments in our state to encourage that economic growth.”
The property tax hike bill is due for a hearing in the Ways and Means Committee on Thursday. the income tax bill is due for a hearing in the same committee on March 5.
Dan Schere can be reached at firstname.lastname@example.org