By Adam Pagnucco.
It won’t be a surprise to Montgomery Perspective readers that County Executive Marc Elrich wants to raise taxes. After all, he has tried to do so before and succeeded a year ago. But the current argument he is using is a rather novel one: Virginia jurisdictions can levy higher taxes on commercial property than residential property, so we should do so too.
Elrich has been making the case to do this for years. Most recently, he did so at a BisNow event attended by many folks in the business community. In 2007, the Virginia state legislature passed legislation allowing local jurisdictions in Northern Virginia and Hampton Roads to charge higher tax rates on commercial real property to finance transportation projects. Not all eligible jurisdictions do this, but Arlington and Fairfax charge the maximum allowable rate of 12.5 cents on $100 of assessed value. Maryland state law requires counties to set uniform tax rates for both residential and commercial properties. (There is a caveat: some counties have additional tax districts such as MoCo’s White Flint district.) Since transportation is important to economic development, Elrich thinks Montgomery County should be able to pay for it with an additional commercial property tax, just like Virginia. After all, isn’t Virginia outpacing us in economic development?
Elrich is correct on his facts here, but his argument lacks context. Virginia does a LOT of things differently than MoCo. Here are a few of them.
Virginia has lower income taxes than Maryland.
Both Maryland and Virginia have state income taxes, but Maryland counties charge income taxes too whereas those in Virginia do not. The result is that Maryland residents generally pay higher income taxes. For example, the marginal combined state and local tax rate at $100,000-125,000 of single filer income is 5.75% in Virginia and 8.20% in Montgomery County. The top marginal tax rate is 5.75% in Virginia and 8.95% in Montgomery County. So if we want to be like Virginia, we should charge lower income taxes.
Instead, Erich favors higher income tax rates, although only for the highest earners. Recent state law changes allow counties to design local income tax brackets with lower rates at the bottom but Elrich has not recommended doing this unless he can raise the maximum rate too.
Virginia has lower energy taxes than Montgomery County.
Energy tax rates are hard to compare because of differences in mode, calculation and products taxed. Nevertheless, I took a stab at calculating energy tax receipts per capita in FY21 and published the chart below last year.
On a per capita basis, MoCo’s energy taxes are several times higher than what is found in Virginia. If we want to be like Virginia, we should sharply reduce energy taxes. Elrich has never recommended doing so.
Virginia does not have rent control. MoCo does.
Rent control is one of the most ruinous economic policies devised by modern governments. Large majorities of economists oppose it, both generally and in specific response to a recent rent control proposal by President Joe Biden. Rent control has destroyed multifamily housing production in Takoma Park. Virginia jurisdictions don’t have it. MoCo does and Elrich supports it.
Virginia builds tons of road projects while Elrich opposes many of them.
Virginia has a let’s-build-everything approach to transportation projects. It has constructed Metro’s Silver Line and is pursuing bus rapid transit (BRT) projects in Alexandria, Fairfax and the Route 7 corridor. It has also built numerous high occupancy toll (HOT) lane and express lane projects on the Beltway, I-66 and nearby highways. If our goal is to be like Virginia, we should build all kinds of transportation projects.
Elrich generally supports transit and is the father of MoCo’s BRT system concept. However, he built his early political career on opposing the Intercounty Connector, which now links Rockville and Gaithersburg to East County. He opposes M-83, the long-planned highway in Upcounty, and was one of the loudest opponents of former Governor Larry Hogan’s toll lane proposal for the Beltway and I-270. It’s safe to say that Elrich will never adopt Virginia’s approach to transportation projects even if he had all the money on Planet Earth.
Virginia imposes deadlines on some development approval processes.
If Elrich favors economic development, he should take a hard look at how MoCo approves development proposals. Virginia state law imposes deadlines on some local development approval processes, and in the cases of street construction, plats, performance guarantees, small cell facilities and some wireless facilities, requests are “deemed approved” if approval deadlines are passed. Would Elrich favor this approach in MoCo?
Some Virginia jurisdictions are moving to abolish exclusive single family zoning. Elrich disagrees.
Arlington and Alexandria have both passed ordinances to remove exclusive single family zoning regimes to facilitate more housing construction, a key priority in economic development. In commenting on a similar proposal in MoCo, Elrich was quoted by WJLA-TV: “If I had veto power over it, which I don’t, I’d veto it.”
Unlike MoCo, Northern Virginia localities do not have elected county executives.
MoCo and most large Maryland counties have elected county executives who preside over local governments. In Virginia, county executives are professional managers appointed and overseen by local legislatures. Similar arrangements prevail for other top executives like city managers, county managers, county administrators and the like. The intent of this structure is to prevent politicization of government. Whether that’s really the case (and I’m skeptical of that), I bet there are no county executives in Northern Virginia who have a history of comparing “unbridled growth” to a cancerous “tumor” as Elrich once did. Would Elrich do as Virginia does and turn over county government to career managers? What do you think?
So look, folks. Raising money for transportation is important and Northern Virginia’s approach to doing it has not killed their economy. But Elrich is deliberately cherry picking from their policy mix. He spotlights the one element he agrees with and – surprise! – it involves higher taxes. He then opposes or ignores the rest of what they do to create robust economic growth.
Let no one be fooled. Elrich has failed to restructure county government to save money as he long ago promised to do and instead wants the one solution he always seeks to virtually all problems.
More. Taxes.