The Honorable Tom Quirk
Chairman, Baltimore County Council
400 Washington Avenue
Towson, MD 21204
Dear Chairman Quirk and members of the County Council:
On behalf of National Taxpayers Union (NTU), the nation’s oldest taxpayer advocacy organization, I write to express our concerns with the myriad of proposed tax hikes contained within the county budget for FY20. The budget in its current form calls for $3.4 billion in spending and tens of millions of dollars in higher taxes on consumers and taxpayers. We believe the people of Baltimore County are taxed enough already and higher taxes will only further burden your constituents. Accordingly, I urge you to avoid the mistakes of neighboring Baltimore City, and reject the tax increases contained in County Executive Olszewski’s budget plan now before you, and work instead for reforms that will leave taxpaying citizens and their children better off than they are today.
The following recommendations would make the proposed budget stronger:
No Income Tax Increase:
The bulk of the new revenue proposed in the FY20 budget is generated from an increase to the county income tax rate, which would rise from 2.83 percent to 3.2 percent. This 13 percent tax increase would raise more than $33 million annually. For an individual earning $50,000, that amounts to an additional $180 of their hard earned money to government coffers each year.
Some would argue that the County is ripe for an income tax increase since one has not occurred in 30 years, and other counties have raised their rates during that time. Yet, receipts from the county’s portion of the income tax rise with the incomes of residents, without any rate increases. In addition, neighboring jurisdictions have paid a price for choosing the route of higher income taxes. According to an annual survey from the Chief Financial Officer of the District of Columbia, examining metropolitan-level tax burdens for the largest city in each state, Baltimore ranked third in the entire nation for a families at the $50,000 - $150,000 income levels. Property taxes were the major reason why Baltimore’s burden was so heavy, but income taxes were close behind. Not coincidentally, Baltimore was among the 6 out of 51 localities that lost population between 2010 and 2017. Surely Baltimore County should heed this cautionary tale, and avoid a headlong rush into mimicking the City’s high tax rates. In so doing, the County can preserve some of its competitive economic advantages.
Oppose Wireless Tax Increase:
The proposed budget follows in the mistaken footsteps of Baltimore City and would also establish a harmful new tax on wireless phone service, which would hurt working families across the county. The suggested cell phone tax would charge consumers $3.50 per line on their cell phone service plan, and is projected to raise nearly $30 million annually. For a typical family with four wireless lines, they would pay an additional $170 in new tax on top of all the other taxes and fees they already pay. By design, taxes on cell phone service are discriminatory. This is particularly true for the “per-line” model of wireless taxation which levies high charges on each line of a service plan, resulting in a disproportionate impact on low-income consumers who are increasingly depending on wireless service as their sole means of communication. As the CDC’s Wireless Substitution study points out, over half of American homes are now wireless-only. This percentage spikes past 60% for low-income households. There is no doubt that this large wireless tax increase will be felt immediately by many constituents who will be forced into difficult decisions about essential cell phone service connectivity.
According to the nonpartisan Tax Foundation, taxes, fees, and governmental surcharges on wireless consumers increased in 2018, jumping from 18.5 percent to 19.1 percent of the customer’s bill. If the new telecom tax scheme is allowed to take effect, wireless tax bills in Baltimore County would be slapped with a combined rate, all levels of government, of nearly 25 percent. All told, this increase would result in Baltimore County having one of the highest combined wireless tax rates of any locality in the country, closely following behind Baltimore City and other notoriously high tax and fiscally irresponsible jurisdictions such as the city of Chicago.
This proposal also comes on the heels of a statewide 911 fee increase on wireless lines and the threat of another round of fee hikes at the local level. Estimates project that Baltimore County families could end up paying more than $250 per year in new cell phone taxes and fees, specifically bringing the total tax bill for a family with four lines to roughly $415 per year.
Reject Hotel Tax Increase:
The proposed budget also includes a misguided increase to the lodging tax, which is a charge consumers pay for stays at hotels and motels. Increasing the rate from 8 percent to 10 percent is projected to generate $2.5 million annually for the county. Hotel taxes are attractive to local politicians because they are a way to shift the tax burden to “outsiders,” but they are not a stable source of revenue and the epitome of poor tax policy.
Baltimore County faces some challenges, but has many options for meeting them. These include examining non-instructional education expenditures for overlap and opportunities for consolidation, use of technical auditing for infrastructure projects, and reforming bidding procedures for County projects. Most importantly, NTU urges Baltimore County to refrain from mirroring the fiscally irresponsible policies of Baltimore City next door that have resulted in economic decline and outmigration for that community, and we stand ready to work with you in finding positive solutions that will benefit everyone who calls this area home.
Pete Sepp, President
National Taxpayers Union