By Adam Pagnucco.
The county council has cast a straw vote by 6-5 to raise taxes on homeowners who receive the Income Tax Offset Credit (ITOC), a flat $692 credit received by residential property owners who occupy their properties. Before doing so, the council adopted an amendment that would increase the tax hike.
I have written about this proposal before. The council’s Government Operations and Fiscal Policy (GO) Committee recommended adopting a progressive income tax structure and repealing the $692 homeowner tax credit to pay for it. (As of two years ago, more than 192,000 homeowners received this credit.) The proposal would cut income taxes for almost all renters, raise taxes for homeowners at the top and bottom of the income distribution and provide middle income homeowners with tiny net tax breaks topping out at $58 for those making $150,000. The committee’s proposal would also create a structural deficit in out years.
In a council session today, Council Member Marilyn Balcombe made a motion to amend the GO Committee’s proposal. Relative to the committee, Balcombe moved to raise the tax rate on income up to $50,000 from 2.5% to 2.7%. She also moved to raise the tax rate on income between $50,000 and $150,000 from 2.8% to 3.0%. Under both proposals, the tax rate on income above $150,000 would be 3.3%. Currently, the county taxes all income at 3.2%. Like the GO Committee, she favored repealing the flat $692 homeowner tax credit.
Council Member Balcombe’s tax brackets.
These are the net impacts of Balcombe’s proposal on homeowners receiving their tax credit at taxable incomes of $50,000, $100,000 and $150,000. Let’s remember that these homeowners will be receiving an income tax cut, but that will be offset by the loss of their $692 credit. How will they fare on net?
All of them would owe more in taxes than under the GO Committee’s proposal or current law. As a matter of fact, I am unable to locate an income level under which a homeowner receiving their homeowner tax credit would get a tax break.
This a tax increase on homeowners – at least on those who have applied for and receive their homeowner tax credit.
Balcombe’s proposal does have the virtue of raising more money for the county budget than the GO Committee’s proposal. It also avoids the structural deficit implications of what the GO Committee wanted to do. The fiscal impacts showing net revenue increases are shown below.
Balcombe was joined by Council President Natali Fani-González, Shebra Evans, Sidney Katz, Dawn Luedtke, Kristin Mink and Kate Stewart in voting to adopt her amendment. Council Members Andrew Friedson, Evan Glass, Will Jawando and Laurie-Anne Sayles voted no.
The council then went on to approve the amended committee recommendation on a 6-5 vote. Voting in favor were Fani-González, Balcombe, Evans, Katz, Luedtke and Stewart. Voting no were Friedson, Glass, Jawando, Mink and Sayles.
Now to the politics. County Executive Marc Elrich is a bitter opponent of this plan and has blasted it publicly as a “con job.” His recommended 6.3 cent property tax increase would have applied to homeowners as well as commercial property owners. The latter are held harmless by the council’s vote, which targeted homeowners alone for a tax increase. This muddies the argument between the executive and the council. If the council follows through on this, they cannot honestly claim to have avoided a tax hike. What we have now are competing plans to raise taxes.
It is also very odd to see Friedson, Glass, Jawando, Mink and Elrich on the same side of an issue. I’m a fan of unholy alliances but this is a strange one! As at least two of these folks will be out of office in a year’s time, it may be the last occasion to see them all agree on anything.
The Balcombe-amended tax change raises $78 million for this year’s operating budget and makes it a bit easier for the council to rewrite Elrich’s budget. The council still has a lot of work to do with MCPS funding remaining a huge question. We shall see what twists and turns are in store as the council approaches the finish line of a very tough budget season.