Corporate tax “loopholes” cost Baltimore City $11.7 million last year, Mayor Sheila Dixon said Friday. That?s why she supports a proposal by Gov. Martin O?Malley to tax a certain type of corporate real estate transaction that currently does not generate dollars for state and local governments.
We agree with the governor that home sellers and buyers throughout the state should not subsidize corporations. But the main issue for Baltimore City is not that it can?t capture the benefits of a few building sales, but that so many of its buildings do not generate any money for the city. That is the issue Dixon and the governor, who as mayor experienced this problem too, should focus on changing.
Moody?s Investors Service estimates that about $9 billion of property in the city is tax-exempt. That means that either government or nonprofit agencies own it ? and that 26 percent of city property is not taxed. It also means the city is losing about $204 million each year at those property values ? or almost enough to pay for the health care of active and retired city employees this year.
The reason the city is home to so many nonrevenue-generating buildings is that city property taxes, twice as high as surrounding jurisdictions, make choosing Baltimore unattractive for citizens and businesses that do have to pay taxes. Since nonprofits don?t pay, a city address is viable ? and desirable. Statistics show that 29 percent of the non-government work force in the city is at nonprofits ? or about three times the average for the state.
While nonprofit workers contribute to the city through their income taxes, their employers may or may not be covering the costs it takes to provide city services to them. Many do and have contributed, including Johns Hopkins, by making payments for services. More of them should ? unless they want legislation that forces some to pay taxes ? something that may be considered in the next legislative session, according to O?Malley.
As he said, Johns Hopkins University and medical institutions and the University of Maryland Medical System are “national treasures.” But the city can?t afford to attract more of them at the expense of deterring businesses and the professionals they hire to fill their jobs.
Unless the city wants to waste time patching more “loopholes,” it should stop the cycle that got it into this position in the first place. The only way to do that is to cut property taxes in half or more to levels of surrounding counties. As nonprofits have shown, take out the tax issue, and the city is an attractive place to locate. That would drive up demand for property ? and prices ? and bring more young professionals into the city to work and live, and eventually own homes. That could only benefit the city treasury and city life. It would also decrease demand for state aid. With a looming $1.7 billion “structural” deficit, that would be welcome news for all Maryland taxpayers.
