Good Afternoon Madam Chairman, Senators. Thank you for the opportunity to address this Committee on the matter of HB 392.

"Truth in Taxation" is a commendable objective and makes a catchy soundbite. Unfortunately, HB 392 does more to raise questions about truth in taxation rather than to provide it. The Maryland Taxpayers Association opposes the bill in its current form. At best, it offers a cosmetic response to a real problem. At worst, it could increase property owner risks of future tax increases by confusing a large population of homeowners accustomed to existing tax rates and fractional assessment.

Bill proponents offer two principal arguments in support of the proposed change in real property assessments. First, supporters argue that assessment at full market value will make it easier for individuals to understand and crosscheck tax bills for their property. Second, supporters claim that fractional assessment puts Maryland at a disadvantage in competition with neighboring States for business investment and job growth by giving an appearance of higher taxes when effective taxation is actually lower here.

The first argument is probably valid, but it fails to consider risks to taxpayers in changing a decades-old fractional assessment system in a single year. Many homeowners understand the present system, are aware of current tax rates, but annual tax bills and valuation statements go to the mortage service agent. Taxpayers frequently do not see the tax bills annually and could easily remain predisposed for several years to misinterpretation of a proposed tax rate increase as a rate reduction.

The second argument is specious. It implicitly assumes that business and investment decisions are made on the basis of nominal rather than real, effective taxation. It also ignores the reality that indigenous firms fully aware of Maryland's effective real property tax rates demand exceptional tax treatment as a condition for remaining here instead of moving to other States. The Marriott Corporation is a conspicuous case on point.

Moreover, HB 392 amendment of section 12 of article on property taxation directly challenges any claim of establishing "truth in taxation." It mandates revaluation of use-valued property in a manner providing revenue neutrality. Why? Because property taxes are a product of a tax rate and an assessed valuation. The bill adjusts existing tax property tax rates to yield revenue neutrality on property now assessed at 40% of value. But, use-valued non-utility properties are now assessed at 50% of valuation. Maintaining revenue neutrality under these conditions requires either a change in valuation or use of diferent tax rates for use-valued property (farms, woodland, country clubs, planned development) and other property classes.

Section 12 begs the question, Which is the truth? Current valuations of use-valued property or valuations necessary to maintain revenue neutrality under full valuation assessment? However one answers, the bill passed by the House of Delegates clearly signals that property valuation in the State of Maryland is politically determined to meet politically expedient revenue objectives.

HB 392 and other developments in this year's legislative session prompt parallels in my mind between England's Robin Hood fable and the current political environment in Maryland. Proposing new taxes in face of surplus revenues, Governor Glendening qualifies as a fair proxy for the Sheriff of Nothingham. Planning growth of State expenditure at a much faster rate than expected for personal income growth, the General Assembly (with help of the Department of Assessments and Taxation) qualifies as proxy for Sheriff's deputies assessing and collecting burdensome taxes from the peasantry to support court favorites and the privileged aristocracy (Erikson, Marriott, Paterakis, etc.). But, there is no Robin Hood to help the taxpayer.

MTA urges this Committee to proxy Robin Hood, come to the aid of the peasantry and act to give real relief to taxpayers instead of applying contaminated, comestic dressing to open wounds.

• Accelerate the State income tax cuts enacted in 1997, and
• Re-establish the county "piggyback" income tax as a fraction of State income tax liability, simultaneously providing tax relief and truth in taxation.

Thank you for your time and consideration.

Return to Publications & Testimony