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As Long as We Remember...

October 4, 2004

What One Hand Gives, The Other Takes Away

Tony Soltero

Whenever I anticipate that I-270 is likely to be a brick wall for my commute home, I bail out of the DC Beltway as soon as I cross the American Legion Bridge and cut through Potomac.

It's a pleasant drive through some of the most beautiful and affluent neighborhoods in the state, featuring lush tree-lined roads and palatial homes. It feels like one big golf course. It takes a little longer than the freeway, but my blood pressure is always grateful for the favor.

So when the heavy downpours wrought by the remnants of Hurricane Jeanne paid a visit last week, I thought it would be a good time to take the scenic route home. But this time there were some odd additions to the usual display of elegant mansions and verdant, tightly manicured lawns.

It turns out that a number of these Potomac homes had foisted signs on their lawns, boldly declaring that "YOU ARE ENTERING A HIGH-TAX ZONE."

Well, I was suddenly alarmed. Did they just install new toll booths on Route 28? Did I have enough change?

No! Apparently the residents of Potomac, they of the 20-acre properties and Mercedes in their garages, are feeling a little deprived. While it is not obvious how these "high" taxes they're complaining about are impacting their standards of living, maybe they've been forced to switch to the cheap Oregon caviar or something. I suppose we should show some compassion for their hardships. It must be rough.

All kidding aside, though, I do wonder what particular taxes they're talking about. If it is income taxes, they're just whining, but if they're referring to property taxes, their concerns are probably not without merit.

I've never understood why some people have such a problem with income taxes. It's the fairest tax of all, based directly on one's ability to pay. If your income goes down for whatever reason, so does your tax bill. No one is ever in a position in which he can't afford to pay his income tax. Wouldn't it be nice if our rents, mortgages, and utility bills also worked that way?

And despite the common misconception, the progressivism of the income tax system renders it impossible to be promoted into a lower net income. Not to mention that our top marginal income tax rate is currently in the thirties - hardly an onerous burden - especially compared to just about every other Western country. The rate is currently too low to cover our government's spending profligacy, but that's a discussion for another time.

But property taxes - they're a different story. Like sales, consumption, and payroll taxes, property taxes are inherently regressive, and carry the potential to create serious damage to the finances of American families if they're jacked up too high. We all enjoy seeing our properties appreciate in value, especially the way home assessments are leapfrogging in Frederick County, but our enthusiasm is dampened significantly when the taxman pays a visit.

For many of us, this is little more than an inconvenience; we grumble and cough up some more cash for the escrow account, and just move on. But for many others, property tax assessments can be the difference between being able to maintain ownership of one's home or being forced to abandon it.

Is it right that a retiree on a fixed income who owns his home free and clear might be forced to sell it because he can't afford the tax bill?

Is it right that a young hardworking family that barely manages to qualify for a mortgage be driven out of its homeownership dreams a couple of years later?

Property taxes, in essence, expose the Big Lie that lurks behind the current administration's tax-cutting mania. Besides the fact that the amounts involved in these tax cuts are of too little significance to make much of a difference in most Americans' lives, the decreased revenues have forced states and municipalities to search for alternative sources of funding - and all too often - it is in the form of increased property (and other regressive) taxes and fees. Exactly the kinds of taxes that ordinary Americans can least afford in a time of economic stagnation.

It's all about shifting the tax burden downwards - something this administration has accomplished in spades.

Ronald Reagan pulled a similar stunt in the early 1980's, when he cut the top marginal income tax rate and quietly hiked the Social Security tax to offset the decrease in revenues. It's a bait-and-switch that would make P.T. Barnum jealous.

It is true, of course, that property taxes remain the main source of funding for county schools, and that our children deserve the best education we can offer them. And Frederick County's population isn't getting any smaller.

But is the relationship between property taxes and school funding an inevitable one? It's certainly traditional, but the two are not necessarily joined at the hip. There's no reason we can't fund our county and state schools from income taxes; we might actually wind up with a better public school system out of the deal.

Then again, things could be worse. As most of us know, the state of Virginia - a state in many ways much more conservative than Maryland - imposes a personal property tax on motor vehicles. Every car owner in Virginia gets nailed with a big tax hit every year - something we in "high-tax" Maryland don't have to deal with. (It makes for a nice little bragging point in the office.)

But the next time the government "offers" us a tax cut - whether it's at the federal or state level - we would be well advised to crunch the numbers and make sure the monies aren't surreptitiously being recovered elsewhere - in a different, and more vulnerable, part of our wallets.

If that is indeed what is disturbing the Potomac homeowners, they have my full support and sympathies.

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