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.