Wednesday, May 14, 2008

Making sense of tax hikes

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The County Council’s Management and Fiscal Policy Committee wants to decrease the property tax rate by 2.2 percent and cut the homeowner credit from this year’s $613 to $361. The committee’s reasoning behind this change is that it would shift some of the tax burden away from landlords, which would theoretically encourage them to stabilize or reduce rent.

I contend that the committee’s reasoning is flawed. Landlords tend to charge what the market will bear, and their underlying costs have little impact on rental pricing. Hence, reducing the tax burden on landlords will simply put more money in landlords’ pockets. Rental prices will generally be unaffected by a reduction in real estate taxes.

County Executive Isiah Leggett’s plan to increase the tax rate by 8.3 percent while offsetting the rate increase with a $1,014 homeowner credit makes much more economic sense than a cut in the homeowner tax credit coupled with a handout for landlords.

Louis Wilen, Olney