A plan to cut our property tax rate

We at Renew Baltimore are proud to join thousands of our fellow Baltimoreans to responsibly seek reductions in our city’s exorbitant and inequitable property tax rates. Our efforts will mitigate the effects of one our city’s primary sources of economic deterioration and unfairness while enhancing economic opportunities for all residents. Disparate property tax treatment has devastated many of our communities over generations, exposing many neighborhoods to underinvestment, joblessness, physical deterioration and despair.

From Park Heights to Cherry Hill to Lauraville, most Baltimoreans are burdened with a tax rate, at 2.248%, that is more than double the rate in the surrounding county. City officials have long tried to address this inequity by negotiating tax breaks to attract large-scale development projects — mostly in the city’s “white L” along the waterfront and central corridor.

This has led to a tax system that is both discriminatory and regressive. A luxury apartment building in the Inner Harbor pays an effective property tax rate that is 63% below the rate paid by most homeowners and small businesses. A Broening Highway Amazon facility pays an effective rate 84% below the city’s full rate, while the property tax bill on a luxury hotel in Harbor East is discounted 93%.

City leaders cut these special deals because they know that without them, the flight of population, jobs, and capital from Baltimore — a long-running threat to its health and viability — would be far worse. The city’s heavy tax burden is even more damaging to manufacturers and other equipment-intensive employers, who pay a 5.62% rate on the value of property and equipment used by their businesses. And the high rates affect renters as well as homeowners, since landlords aim to recover from tenants the full costs of their operations, including tax liabilities.

It’s true, of course, that some city programs aim to provide tax relief more broadly. Most notably, the Homestead Tax Credit limits to 4% the amount that qualifying city homeowners’ assessments can rise in any given year. In inflationary times like these, that might slow flight and keep some loyal Baltimoreans from being taxed out of their homes. But it doesn’t put the city’s rate on par with the nearby competition, and so can never reverse flight.

History shows clearly that the city’s piecemeal, discriminatory approach to mitigating its tax rate is not working: it has failed to adequately address the seven-decades-long exodus of people and investment that renders Baltimore a poorer, less economically dynamic, vibrant, or safe city. It’s also profoundly unfair that ordinary city residents and small employers most loyal to Baltimore face significantly higher tax burdens than suburbanites and the well-connected folks with the wherewithal to negotiate special deals.

Defenders of the status quo will say that reducing the real property tax rate will cost the city too much lost revenue. But the gradual reductions in property taxes that Renew Baltimore proposes — a 44.4% rate reduction spread over six years — will expand investment, invite more Baltimoreans to stay, accelerate in-migration, and create incentives for investors, large and small, to rehabilitate a considerable fraction of our housing stock.

Only with a more competitive property tax rate will Baltimore succeed in attracting new taxpayers, realize higher property and income tax collections, stabilize finances, and spread investment and new job opportunities more broadly and, yes, more equitably. Our surrounding counties all impose real property tax rates less than half the city’s rate. They all boast Triple-A bond ratings. We don’t.

Responsibly reducing and then capping the property tax rate at a more competitive level through a ballot initiative this November is the most democratic way to achieve these goals. With six modest reductions in manageable increments, the city will boast a tax rate that is competitive and attractive, albeit still a bit higher, than other major jurisdictions in Maryland. And by capping the rate in the city charter, the city will ensure that shifting political winds will not undermine this critical reform.

Tax caps have proven to be sustainable and popular over extended periods. Caps of some sort have long helped Anne Arundel, Prince George’s and Montgomery counties prosper. Their populations are increasing, along with their tax revenues. It’s past time for Baltimore to learn from them. The city’s elected leaders and their appointees would be wise to get to work now to take full advantage of the widespread popularity that Renew Baltimore’s initiative has generated and all that it will make possible.

André M. Davis ([e-mail]) served as Baltimore city solicitor from 2017-2020. Anirban Basu ([e-mail]) is an economist and CEO of Sage Policy Group.