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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 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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