MARYLAND TAXPAYERS ASSOCIATION
Testimony by Dee Hodges, President
On behalf of SB 211
Before Senate Budget and Tax Committee
February 21, 2006

The Maryland Taxpayers Association supports SB 211 "Homeowner's Property Tax Assessment Cap."

Since 2001, property tax revenues have flowed in at levels that are higher than ever due to lower interest rates and high volume of sales.

It is a fact that property taxes have historically caused taxpayer revolts more than other types of taxes. Property tax rates affect all constituents and interest groups.

Owners who have retained their homes during the last 5 years may have experienced hidden increases in value, and thus, net worth; however, they do not have any capital gains in real terms.

With the high volume of sales, governments at all levels have higher than normal revenue increases because they can tax these transferred properties at the high purchase prices, and increase them annually from that base.

Already, 12 counties and Baltimore City have a 5% or lower tax assessment cap with 2 counties below 10%. Thus, this bill would have virtually no negative effect for the majority of state jurisdictions. The state has raised the state property tax by 5 cents (a 20% tax increase) and now the Governor only proposes a 2 cent cut in good times. Therefore, the state should not be affected on an averaging basis.

Even though the numbers on the fiscal note seem high in state and local revenue decreases, these are static estimates. Senators might preferably think in terms that this property tax cap puts to work a nearly $149 million investment in citizens' hands in FY 2008. This could provide nearly 2500 new jobs by FY 2009 (Say's Law) and the subsequent income, sales and property taxes from these people. In other words, rather than a decrease, this cap could act as an actual increase in revenues to state and local jurisdictions.

As elected officials, by passing this bill, you benefit the family funds of those you represent and they, in turn, wind up benefiting government through increased revenues. It seems counter-intuitive, but has proved to be true after every tax cut.

Maryland is a place to which businesses prefer not to transfer its people because the total government transfer taxes for purchasing property is 2nd highest in the nation. This bill is but a very small step toward competitiveness. Wise senators should support SB 211 because it benefits constituents (voters) as well as state and local governments.