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Trash Tax Is A Shell Game That May Cost Some

The Trash Tax favors those in more valuable homes.

Mayor Rawlings-Blake has sent some hearts aflutter with visions of a lower property tax and 10,000 new families in the city.  She proposes to achieve these goals partially by collecting a "fee" for trash collection.

In reality, what she is proposing is exchanging one tax for another, which very likely will cost many residents more over the years.

I think this scheme is called a shell game on the streets.

The way the Mayor and her true believers see it, if we collect a trash fee from all property owners and the many non-profits and others who are currently not paying property taxes (and thus getting their trash collected for free) then we will see more money in the city coffers and the result will be a whopping reduction of fifty cents in the property tax rate by 2022.

That is fifty cents over ten years (from fiscal year 2013 to fiscal year 2022).

Let's take a closer look at this slight of hand the Mayor is going to attempt to pull.

First, we have to settle on what the trash tax may be.

According to the Baltimore Sun, Howard County households pay about $225.00 annually, and Anne Arundel County residents pay about $300.00 a year.  Residents in Prince George's County and Montgomery County pay somewhere between $200.00 and $350.00 annually. 

I think it is fair to say that Baltimore City will not be coming in on the low end of the fee list.  But, to be fair, I don't know what the Mayor's plan will entail, so I'll give her the benefit of the doubt and assume that our new Trash Tax will fall in the middle somewhere, at, say $250.00 a year.

If the new Trash Tax is $250.00 a year, you would have to own a home assessed at $50,000.00 in order to break even on the tax swap over ten years.

Here is how I figured this:

$50,000.00 (value) divided by $100.00 (assessed value rate) = $500.00
 
$500.00 X .50 (property tax reduction) = $250.00

And, if you live in a house assessed at less than $50,000.00 you will actually pay more in taxes over the ten year period than you are now paying under the current system.

For example, someone owning a home assessed at $35,000.00 would a get a $175.00 break on their property taxes but have to pay the $250.00 Trash Tax.

That is troubling.

But what is even worse about a Trash Tax is that the more valuable a home is the more money the owner will save over the decade and the faster they will see the savings.

If you live in a home assessed at $80,000.00, it will take you over six years to reach the $250.00 threshold. 

Here is how I figured that amount:

$80,000.00 divided by $100.00 = $800.00

$800.00 X .50 - $400.00

400 divided by 10 (years before .50 is reached) = $40.00

$40.00 x 6.2 (years) = $248.00

You will have to own a home assessed at $500,000.00 to see an immediate even-swap of taxes in the first year.  The more your property is assessed above that mark the more money you will keep in your pocket beginning in the first year, and the more your will profit over the ten year period.

So, in other words, if you live in an area of the city where real estate values have been depressed by the scoundrels on Wall Street, the Mayor's shell game may very well end up costing you more over the years.

If you live in a condo around the Inner Harbor valued at $1 million, you'll see an immediate reduction in your property taxes by $250.00 the first year and a whole lot more over ten years.  (You do the math.)

Currently every property owner in Baltimore City (except the big time developers,  of course) pays the same tax rate for the same services.  But under a new Trash Tax, while we may all pay the same fee, the savings will be unevenly meted out, and, as I have demonstrated, may cost those at the bottom of the housing rung more money in the long run.

And if anyone doesn't think this Trash Tax will increase sooner or later than I've got a neat little shell game that I want you to play.

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Baltimore Matt February 22, 2013 at 07:28 PM
Sean...originally I was against this trash tax but given your math,you are starting to sell me on the idea...how many people's homes have a value of less than 50k?...not that many (slum lords, blighted properties, etc.). Maybe we also need to have a graduated property tax system for residential properties...such as having a .5% drop in rate for 50k in value (the lowest values would have a 4% rate). The rate could cap out at a 1% rate for properties assessed at 300k or more This would help by rewarding property owners that invest in maintaining, improving their properties, and pulling permits for work being performed.
Sean Tully February 22, 2013 at 08:10 PM
Note: Here is link to Baltimore Sun article that I referenced: http://articles.baltimoresun.com/2013-02-13/news/bs-md-ci-trash-fee-20130213_1_rawlings-blake-trash-fee-trash-pickup
Sean Tully February 22, 2013 at 08:13 PM
Matt, so if a person lives in a blighted property that person deserves to see a tax increase? Also, my calculations are based on the tax being $250.00. Do yo really think it will be that low? If it is higher than all my calculations increase so it may be something more like anyone with a home valued at $60,000.00 may pay more taxes over ten years. And, finally, do you really think it is a fair system that has someone living in a shack paying more in taxes than someone living in a Federal Hill waterfront condo? P.S. And Matt, do you really think the trash tax won't be increased over the years? What I can't wait to see is if the Mayor's plan calls for reductions in the property tax beginning this year or is she going to try and sell us that they will be phased in starting in year 5, for example.
Sean Tully February 22, 2013 at 08:27 PM
I don't know how accurate this map is, but is shows the prices of homes in Baltimore City. Dark green represents areas $70,000.00 or less. A lot of the city is dark green: http://www.trulia.com/home_prices/Maryland/Baltimore-heat_map/
Baltimore Matt February 23, 2013 at 01:57 PM
Sean, I think it's fair to have people in blighted areas paying a higher rate. For one, these areas generally use more city services, public schools, policing, alley clean ups, section 8, more likely to be put in jail, etc. A property in Park Heights with a value of 30k per year pays less than $700 per year in taxes and someone with a $500,000 house in Roland Park pays over $11k per year in taxes. And furthermore, if you have a property that is in need of updating, it would be a reward for doing these things by giving the owner some tax relief. As of now, people are not fixing up their properties (at least in a visible exterior way) at least partially because they don't want to pay higher property taxes. Now you do raise a good point about opening the door for the city being able to easily being able to raise the trash tax at will and that is a problem. Believe me, I think the premise for the trash tax is not logical and it should be paid for by property taxes but I do believe we need to have lower property taxes for more expensive properties to help spur building and renovation in all parts of this city.
Sean Tully February 23, 2013 at 04:47 PM
Matt, I think the answer is to keep the current property tax structure in place and reduce it. Those at the top end of the market will still see savings those at the bottom won't but the bottom won't be paying more than they do now at least.
Baltimore Matt February 23, 2013 at 09:13 PM
Sean I would like to agree with you about keeping the current structure but I feel it is standing in our way of attracting wealth and investment. Lets face it, folks who are going to create jobs for their own profit are going to be attracted to places with low to reasonable tax rates and given that the cost of collecting trash is about the same between wealthy residents and poor residents, to have the full price of trash tax on the shoulders of all properties including owners of blighted properties (many are slum lords that do the minimum required to have occupants and have acquired properties that are draining the property values of their home owning, mortgage paying neighbors by having the ability to buy near blighted properties in cash ), we may need to have a trash tax and a graduated property tax system. Furthermore, if garbage collection costs $250, 300, or 400 per property and someone is paying $700 in property taxes, they would not be paying their fair share for keeping city infrastructure after we consider the other expenses that the city needs (police, schools, roads, etc.). As a major city, we should be trying to do away with blight not simply move it and I feel if we reward people for doing what they are supposed to do (repairing and maintaining the interior and exterior of their properties and build new buildings), Baltimore will be a much more attractive city.
Sean Tully February 24, 2013 at 06:55 PM
Matt, you'll never get me to agree with any new tax that costs those at the lower end more while those at the upper end get a break. I doubt it will attract any new residents and what you are missing is that those in the middle will see almost no change and the middle is where Baltimore City is hurting the most. If we keep losing the middle, we'll have a population of 500,000 real soon and that will be made up of 1%at the top and 99% at the bottom, with no middle.
Former Baltimore Native February 24, 2013 at 07:46 PM
Guys, What neither of you realize is that this tax may well push more residents to move out of Baltimore CIty to avoid the tax. Those who are currently renting their house will be loathe to remain in the City when they can simply look for another house to rent in the more crime-free and lower taxed area of Baltimore County. This lack of taxpayers will result in the Mayor and City Council being required to increase the trash collection tax as they "reduce" property taxes. This will give City residents a zero balance in terms of real tax reductions. No, I'm afraid that you need look no farther than the city of Detroit to see Baltimore's near-term future. Here is an interesting video about the current condition of Detroit and how it got that way: http://www.youtube.com/watch?v=1hhJ_49leBw
Baltimore Matt February 25, 2013 at 01:21 AM
Sean, most people in the "middle" would generally not be living in 30k homes in the ghettos. They would mostly be living in homes between 80k and 400K in value. Really, at the end of the day the city need more tax payers in general, these could be middle or upper class residents.
Sean Tully February 25, 2013 at 01:31 PM
Your point isn't lost on me at all. I suspect we will see the Trash Tax applied before any property tax cuts thus actually increasing the amount the middle class will be paying for several years. That is just a hunch but considering how Baltimore City operates, I believe it is a well founded assumption.
Sean Tully February 25, 2013 at 01:38 PM
Matt, I have those figures right here: $80,000.00 - $400.00 reduction in property taxes if dropped by fifty cents. $160,000.00 - $800.00 " " $250,000.00 - $1,250.00 " " $350,000.00 - $1,750.00 " " $400,000.00 - $2,000.00 " " I think you could lose more people in the $80K to maybe $125K area as the tax "savings" may not be seen for many years, if at all. I don't believe the city will reduce property taxes immediately, thus even those living in homes around $500k could be paying duplicate taxes. We'll see. It should be interesting.
Baltimore Matt February 26, 2013 at 01:16 AM
Sean, I know you want poorer homeowner not to be heavily effected. Currently, many of the people making less than 40K per year can be eligible for the homeowners tax credit which caps their taxes but those making over 40k are not eligible. Few people making more than 40k per year would be living in homes with values less than 100K. I think the people who will be the worst off with a graduated tax rate system would be short sighted ghetto slum lords that refuse to maintain and update their properties, not owner occupiers. However, we need to wait and see how much the mayor is proposing this trash tax would cost residents.
Sean Tully February 26, 2013 at 05:11 AM
Matt, from yesterday's Balto Sun: "Wealthy N. Baltimore enclaves are home to biggest homestead beneficiaries Average property tax break for the top 100 is $10,430" http://www.baltimoresun.com/news/maryland/sun-investigates/bs-md-sun-investigates-homestead-credit-20130225,0,220116.story It's not those at the bottom that are getting the breaks under the current system. It is the folks in North Baltimore (the same people who will get the break under a new Trash Tax). But at least now we all pay the same tax rate.

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