The Talbot County Council is once again wrestling with the question of what to do about the county’s property tax revenue cap. As things stand now and for the past several years, annual property tax revenues cannot increase over the previous year by more than 2% or the Consumer Price Index-Urban (CPI-U), whichever is less. Two percent might be a reasonable limit, but from 2010-2015, the CPI-U came in well under 2% in five of six years. Annual increases of 0.55% or less are negligible, especially when viewed cumulatively.
The revenue cap has stymied efforts to collect more property taxes, and kept Talbot County’s tax rate in last place statewide. The current property tax rate is 57.08Ȼ per $100 of assessed value. To be exact, even with the Educational Supplement, our tax rate is 43.8% below the statewide average. The property tax rate in the county with the second-lowest rate in Maryland (Worcester) is 46% higher than it is in Talbot. Our tax rate is truly an extreme outlier.
In the normal course of events, when property values and assessments increase, as they have since the end of the recession of 2007-2009, property tax revenues increase accordingly. But the course of events in Talbot County is not normal. Rather, it harks back to the dark, 20th-century days of the Constant Yield, when, the property tax rate actually fell from one year to the next because the county was prohibited from collecting any more property tax revenue than is had in the previous year.
Since education consumes almost half of the county’s annual budget, it is tempting to think of calls for revenue cap reform as the whining of greedy teachers and administrators. But think again. An insufficient annual budget squeezes many county departments. In fiscal year 2018, for example, 22 of 61 departments were not fully funded. An increase in property tax revenue would remind us that, as President John F. Kennedy once said, “A rising tide buoys all boats.”
What about the effects of a rising tide? A 1% increase, to 3%, would generate $344,000 in additional revenue for the county. A 2% increase, to 4%, would generate an extra $688,000.
And what about the cost? A 2% increase in the revenue cap, from 2% to 4%, would only cost the owner of a million-dollar home less than an additional $100 a year!
In the interest in meeting the needs of its citizens and continuing to provide the high level of services that we have come to expect, it’s time for the County Council to bite the bullet and raise the revenue cap. At the very least, the CPI-U loophole should be closed.