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Josh Dowlut
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Former mortgage company owner who used to write about the nuances of a rigged system, until I left that world to do something productive.  I'm now part of a team that has built a total IT solution that obsolesces the need to ever buy hardware, software, or IT services again. Regarding a... More
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Josh Dowlut
  • Baltimore City property taxes 5 comments
    Nov 24, 2009 2:28 PM

    There is a proposal to enact a punitive tax on abandoned and blighted properties in Baltimore City. Presumably, the purpose is to lessen the burden on regular homeowners and to decrease the number of abandoned, derelict properties in the city. Such a plan will do neither.

    Baltimore's property taxes are the highest in the state by a factor of two. Anything that brings attention to the injustice of Baltimore's property taxes is a positive, but this is an ineffective plan, and there are better alternatives. The proposed plan would do little more than transfer blighted, abandoned properties from private ownership to public ownership, and the proposed plan runs the risk of increasing foreclosures for property developers thereby discouraging development as has already happened in Washington, DC. It was a little over a year ago when DC began punitive taxes on abandoned property, and DC is now seeing foreclosures on property developers. Better alternatives include making large corporations pay their fair share (the recent $200,000,000 Legg Mason tower comes to mind) and reducing obviously wasteful spending (pensions for clerical government employees come to mind).

    Baltimore City has 30,000 abandoned properties. Already the city owns 9,000 of those properties. Of all property in Baltimore, 13% is abandoned, and 25% of residential abandoned buildings are already owned by the city. The city already fails to sell many properties at tax sale for the amount of taxes owed. Raising taxes on abandoned, blighted properties will only exacerbate this and will not lead to a significant increase in taxes actually collected. A punitive rate near 10% also runs the risk of discouraging new development when investors hear horror stories like what has happened in DC -- stories of developers nearing completion and having houses taken from them and losing upwards of 6 figures.

    One of the biggest reasons the city holds so many properties is the highly cumbersome sales process. Local activist Adam Meister told me, “The city should make the process of purchasing city property easy. It is very hard and complex now. The city should also be proactively trying to sell every property they own in order to gain revenue from the sales and future property taxes." Meister tried his own version of urban homesteading in his “buy a block” campaign and ran into a web of red tape trying to buy city-owned properties that derailed the plan.

    Rather than introduce new tax discrimination, a better alternative would be to eliminate existing tax discrimination -- namely big business corporate welfare. Recently Legg Mason built a two-hundred million dollar waterfront office tower on which they will pay ZERO property taxes for the next 15 years. And they will pay ZERO property taxes on the underground garage for the next quarter century. Ultimately property taxes in Baltimore are so high because the average homeowner ends up carrying his fair share, plus Legg Mason’s fare share, plus countless similar deals. Historic tax credits and tax freezes on new luxury home developments lead to the people of modest means subsidizing the wealthy people. Just taxing Legg Mason at fair market value would bring in an additional 5 million dollars a year. Legg did keep 700 jobs in the city. Would they have left without the tax break? It's debatable. What is not debatable is that the cost of the tax break divided by the number of jobs equals almost $7,000 per job. Many businesses could create new hires for much less incentive than $7,000 per job.

    Instead of finding new ways to add more taxes, the city must get spending under control. As an example, city employees currently get something that 82% of the people in the private sector do not get -- a pension. Yes, a person who is in a physically demanding job (e.g., police, fire, garbage) that cannot be performed for his/her entire life should get a pension, but clerical workers should not get pensions. Pensions cost the city an amount equal to 30% of the total property tax revenue collected. Baltimore could reduce its property tax rate roughly 30% (subtracting for police, fire, and garbage) simply by eliminating a perk that 82% of private sector employees don’t receive. Assuming a tax assessment of $200,000, an average homeowner pays approximately $100 PER MONTH just to cover the pensions of city government workers. Before we look at adding more taxes, let's start looking at ways to control spending.

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Comments (5)
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  • yellowhoard
    , contributor
    Comments (1500) | Send Message
     
    It would be better if they would eliminate property taxes altogether for blighted buildings that were properly demolished.
    24 Nov 2009, 02:37 PM Reply Like
  • Josh Dowlut
    , contributor
    Comments (110) | Send Message
     
    Author’s reply » I was on Baltimore's NPR from noon-1PM today talking about this.
    24 Nov 2009, 03:47 PM Reply Like
  • Dialectical Materialist
    , contributor
    Comments (5080) | Send Message
     
    It shouldn't surprise me to hear this but it does. Who are these people who think that the answer to everything is to raise taxes? In the video game "Roller Coaster Tycoon" you can set the price of your rides and snacks. This is a great game for children and young adults to learn that when you aren't selling enough tickets to cover the operating cost of the ride, you need to LOWER the cost of the tickets. You can try to meet expenses by raising the cost, but of course you sell even fewer tickets and so run a larger deficit. Have people in city government never killed an hour or two with a game like this? You'd think they'd at least have played Sim City once or twice.

     

    What gets me is that there are many real problems with complex possible solutions and multiple angles of attack, each with their own unintended consequences. But this is not one of them. Raising taxes in a blighted area will not magically improve revenue. If we can't get the simple stuff down, we have no chance with the hard stuff.
    12 Dec 2009, 03:03 PM Reply Like
  • Mr. Mephistopheles
    , contributor
    Comment (1) | Send Message
     
    Dialetical, you obviously didn't listen to the broadcast; otherwise, you would have known that the proposal included a plan to LOWER property taxes for people who own property that is not vacant and uninhabitable. Thanks for playing.

     

    On Dec 12 03:03 PM Dialectical Materialist wrote:

     

    > It shouldn't surprise me to hear this but it does. Who are these
    > people who think that the answer to everything is to raise taxes?
    > In the video game "Roller Coaster Tycoon" you can set the price of
    > your rides and snacks. This is a great game for children and young
    > adults to learn that when you aren't selling enough tickets to cover
    > the operating cost of the ride, you need to LOWER the cost of the
    > tickets. You can try to meet expenses by raising the cost, but of
    > course you sell even fewer tickets and so run a larger deficit.
    > Have people in city government never killed an hour or two with a
    > game like this? You'd think they'd at least have played Sim City
    > once or twice.
    >
    > What gets me is that there are many real problems with complex possible
    > solutions and multiple angles of attack, each with their own unintended
    > consequences. But this is not one of them. Raising taxes in a blighted
    > area will not magically improve revenue. If we can't get the simple
    > stuff down, we have no chance with the hard stuff.
    13 Dec 2009, 12:09 AM Reply Like
  • rreed2000
    , contributor
    Comment (1) | Send Message
     
    I agree with almost everything you wrote - with the exception of your stance on city employees and their pensions. The problem isn't so much with the city government and its employees, it's with the rest of our society. People who work diligently at a job for 30 - 40 years are deserving of a pension and every responsible organization should provide one.
    Entrepreneurs like yourself willingly take financial risks in return for a potentially large gain. No one has every thought of a city job as one which offers a large financial gain.
    Let me just add that I live in Howard County and work in DC and I explored the possibility of buying a condo at the harbor. The price was ok (although condo fees can get a bit outrageous) but really it was the property tax that killed any further consideration. The city is killing its future growth with the current tax level.
    14 Apr 2011, 08:36 PM Reply Like
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