The City of Baltimore finds itself mired in a classic Catch-22. Property taxes in Baltimore City are more than twice as high as any county rate in Maryland. That’s because to balance its budget each year, Baltimore City must levy disproportionately high taxes on its citizenry, which in turn induces more people to leave the City each year. Historically, the result has been to require that additional burdens be placed on an ever-dwindling supply of remaining taxpayers, which in turn turns out another set of Baltimore City residents. Between 2000 and 2005, the number of income tax returns collectively filed by Baltimore City households declined another 4 percent even in the midst of national and local housing booms.
What is needed is a complete and utter divorce from this path. The mayor and City Council should simply make a promise to the people of Baltimore that an irreversible path of tax slashing shall be pursued. Each year, City leaders should guarantee a 2 to 4.5 percent reduction in property taxes per year. Severe penalties for failing to deliver on this promise should be established, including total forfeiture of annual compensation. The only exception would be in the wake of an act of God, for instance a Katrina-like event.
What’s remarkable about this promise is that it can be kept without too much difficulty. A credible promise of tax reduction would bring new residents and investors to Baltimore City even before the current tax rate was reduced substantially. The accompanying new tax base would under most scenarios more than offset the loss in revenues from tax rate reduction. This is even more true given the impending impacts of Base Realignment and Closure on Central Maryland’s economy and the continued outward expansion of the massive Washington metropolitan area. All it takes is a credible mayor and City Council.
