If you love Baltimore and want it to work better for all its residents, hustle down to City Hall this afternoon. At 4 p.m. Councilman Bill Cole will hold the first meeting of his Special Committee on Property Tax Relief. Nothing is more important to the future of this city than this effort to make it more “capital friendly.”
Baltimore’s high property tax rates have been repelling investment in new housing, offices, factories and other vital capital for decades, spreading decay and poverty over vast areas. Redevelopment officials implicitly recognize these taxes’ repulsive power whenever they hand out tax abatements or other subsidies to lure investors downtown. While their efforts are commendable, they’re insufficient; for a widespread, organic renewal, tax rates need to go down everywhere, for everyone.
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To appreciate how the awesome power of capital friendliness can alter a city’s fortunes, consider San Francisco and Boston. Both are now commonly described as “superstar cities,” but for three decades after World War II they were declining even faster than Baltimore.
From 1950 to 1975, San Francisco’s population fell 14 percent and Boston’s 21 percent — much more than our 10 percent decline. We were all deindustrializing: Between 1947 and 1972, we lost 25 percent of our manufacturing jobs, but San Francisco lost 28 percent and Boston 42 percent.
Despite being the only city of the three to endure riots in 1968, Baltimore’s real per capita income grew fastest between 1969 and 1974. Its 12 percent growth dwarfed San Francisco’s 5 percent. Boston grew not at all. And Baltimore was safest: San Francisco’s crime rate was 19 percent higher than ours in 1975, and Boston’s was a staggering 53 percent higher.
All three cities were suffering from high property tax rates that repelled capital investment, jobs and residents. By the mid-1970s, San Francisco’s rate exceeded 3 percent of market value. Boston’s rate was nearly 20 percent of assessed value, but its assessment practices were so chaotic that no one was really sure how high its effective rate had risen.
Then California voters started a tax revolt. In 1978, they overwhelmingly approved Proposition 13, which forced San Francisco to chop its property tax rate by 57 percent overnight.
San Francisco’s leaders predicted catastrophe, but the tax cut attracted residents and businesses back into town — and they came with fat wallets. Proposition 13’s resultant real estate boom would eventually restore San Francisco’s property tax receipts to their former level. But even more quickly revenues rolled in from enhanced payroll taxes and permit, license and user fees — despite a severe national recession. By 1982, San Francisco raked in 66 percent more inflation-adjusted dollars than it had collected the year before Proposition 13, and officials rejoiced at a surplus of more than $360 million (in today’s dollars).
Meanwhile, Baltimore and Boston continued to spiral downward. Between 1975 and 1980, we lost 8 percent of our population and Boston 12 percent.
The tax revolution arrived in Massachusetts in 1980, however, and Proposition 2 1/2 forced Boston to cut its property tax rate by an estimated 75 percent within two years. Predictably, politicians panicked. But as Boston attracted more physical capital, people followed and opportunities grew, making Boston healthier, wealthier and safer.
Sadly, the tax revolt never reached Maryland, and Baltimore’s property tax rate (then slightly higher than today’s 2.268 percent) has long been roughly double that of the other bayside cities. So while San Francisco and Boston repopulated and achieved “superstar” status, Baltimore kept sliding. Between 1980 and 2000, as San Francisco’s population rose 14 percent and Boston’s rose 5 percent, ours fell 17 percent. Most tragically, Baltimore became steadily poorer. Between 1979 and 2005, while San Francisco’s real median household income rose 35 percent and Boston’s rose 26 percent, ours fell 6 percent.
Increasing poverty in Baltimore, of course, has contributed to blight, struggling schools and crime. By 2005, our overall crime rate was 29 percent higher than San Francisco’s and 20 percent higher than Boston’s.
Despite San Francisco and Boston’s 30-year head start, however, Baltimore can still join them and become a “superstar city.” We have architectural treasures, outstanding academic institutions, world-class hospitals and a charming waterfront. But Baltimore will not achieve an enduring renaissance unless it imitates its bayside counterparts and slashes property taxes substantially. It’s time to send that message to the city council — and for them to get the job done.
SHOW UP!
Who: Baltimore Councilman Bill Cole
What: Property tax relief
When: 4 p.m. today
Where: City Council Chambers, 100 N. Holliday St.
Contact: Betsy Zeigler of the councilman’s staff, 410-396-4816, or [email protected]
Speakers must limit remarks to 10 minutes.
Steve Walters teaches economics at Loyola College. Louis Miserendino teaches social studies at Calvert Hall College.
