As every weather watcher knows, rain falls unevenly across the state. That’s why meteorologists use phrases like, “scattered showers” and “50 percent chance of rain.” Unfortunately, Maryland’s infamous “rain tax” falls just as randomly upon Maryland’s beleaguered taxpayers.
The U.S. Environmental Protection Agency decided to improve the Chesapeake Bay’s water quality by putting all the Bay’s watershed states on a “pollution diet.” Now each state must reduce its stormwater runoff (containing oil, dirt, nitrogen, phosphorus, etc.) by building very expensive runoff control devices. Maryland’s cost is $14.8 billion.
Each of the watershed states is free to find its own way to pay its tab. Maryland decided to go with a “rain tax,” an annual tax levied on the amount of “impervious surface” you own. Impervious surfaces (driveways, parking lots, rooftops) “cause” pollution runoff by blocking rain from soaking into the earth.
Up to this point Maryland’s rain tax, although onerous, was at least uniform (i.e., everyone paying the same tax rate on the amount of impervious surfaces they own).
Then things got screwy. First, state lawmakers limited the rain tax to only 10 of Maryland’s 24 local jurisdictions (Baltimore city and Anne Arundel, Howard, Carroll, Harford, Charles, Montgomery, P.G., Frederick and Baltimore counties).
So, a shopping mall in Charles County must pay a huge yearly rain tax while a similar mall next door in Calvert County does not. Shouldn’t we all be saving the Bay together?
State lawmakers further decided that, within the 10 rain tax counties, certain properties should be exempt, namely those owned by the state and local governments (and volunteer fire departments). That’s right, they included churches and nonprofits but excluded themselves.
So, while most of us are paying an annual rain tax on our humble abodes, the 54-room governor’s mansion will be rain tax-free. What happened to “One Maryland”?
But the final unfairness is letting all 10 rain tax counties devise their own separate rain tax laws. The result is a hodgepodge of different tax rates, different exemptions, different credits, different phase-ins and so on.
Beginning July 1, Maryland will have 10 different rain taxes and the amount you pay will depend, entirely, on your ZIP code. In other words, Maryland’s rain tax will fall just as randomly as the rain itself.
For starters, the 10 rain tax counties don’t even agree on a common name for the tax. They do agree that impervious surfaces should be measured by a standard unit, an “equivalent residential unit” or ERU. But then they all adopted different size ERUs. Anne Arundel’s ERU is 2,800 square feet of impervious surface, Harford’s is 500 square feet. A standard unit cannot have 10 different definitions.
Not only are there 10 different ERUs for measuring a standard unit of impervious surface, there are also 10 different tax rates per ERU. Howard’s rain tax is $15 per ERU, Montgomery’s is $88.40 per ERU.
But wait, it gets worse. Based on local politics, each county is treating different types of property differently. Most counties are taxing condos and townhouses less than detached homes. Likewise, commercial property is getting hit harder than residential, but in very different ways county-by-county.
In Baltimore County, for instance, the rain tax on commercial property is $69 per ERU but only $39 to $21 on various types of residences. In Baltimore city, the mayor’s plan taxes residences at $48 to $144 per year, but commercial owners are taxed at $2,987 per acre, the highest in the state. As a result, commercial properties, 11.6 percent of the city’s total area, will pay 67 percent of the city’s rain tax.
As we speak, the city council is revising the mayor’s plan with some bizarre results. For instance, some businesses whose stormwater runoff goes directly into the Bay say they should get a rain tax break because they aren’t using the city’s storm drain system. Huh? Runoff is runoff no matter how it gets into the Bay.
The rain tax on nonprofits (churches, schools, hospitals) also varies between jurisdictions. In Anne Arundel, it’s a flat $1 per year, in Montgomery it’s capped at $2,033 per year while in Howard and Baltimore the nonprofits are treated the same as businesses. Some Baltimore city lawmakers want to give nonprofits a break but several city council members view the nonprofits as freeloaders because they don’t pay city property taxes.
Completing the chaos are the rain tax counties’ 10 different tax credits, caps and phase-ins. For instance, the rain tax is being phased-in over 10 years in Harford County, over three years in Anne Arundel County and over three years (for first-time rain tax payers, only) in Montgomery County.
Some local lawmakers are in rebellion. Anne Arundel’s new county executive, Laura Neuman, vetoed the council’s rain tax, leading to an improved revision.
And Frederick County’s commissioners “complied” by passing only a one-penny rain tax, raising a total of only $487. Thumbing his nose at the environmental madness, Commissioners President Blaine Young said, “I’m just not willing to fall in like some little minion because the governor says you’re going to.”
It appears that plenty of state taxpayers agree with Young. State and local lawmakers made a complete mess of the rain tax which was a bad idea to begin with.
The General Assembly has one last chance to repeal the rain tax before next year’s elections, it ought to take it.
Blair Lee is chairman of the board of Lee Development Group in Silver Spring and a regular commentator for WBAL radio. His column appears Fridays in the Business Gazette. His past columns are available at www.gazette.net/blairlee. His email address is firstname.lastname@example.org.