Last month, a debate was held among three of Howard County’s bloggers over two different property tax cut plans being offered by County politicians. In Democratic County Executive Jim Robey’s plan, he called for a cut in the rate a home is assessed by $0.03/$100. Republican Councilman Charles Feaga proposed a lowering of the cap on the yearly rise in the taxable assessment from 5% to 4%. In the debate, I believe the final conclusion was that Feaga’s plan was better for a property owner in the long term, especially those that have settled into a home and plan on living in that home for a while. However, and the plan that I figured would be better for me personally, Robey’s plan would be better in the short term for a property owner, especially for homeowners who plan on moving to a more expensive home in less than seven years. In other words, it depended on your particular situation.
The fatal flaw with Feaga’s plan, and the reason I was a supporter of Robey’s plan, is that someone like myself who hopes to move into a larger house someday, really doesn’t get as large a benefit from Feaga’s plan until much, much later down the road. The problem is that when a person sells their home and moves to another home, the homeowner has to start paying property taxes on the full-assessed value of the new home and loses the savings they had with the cap on the rise in the taxable assessment in their old home. In other words, the homeowner has to basically start over from ground zero and any “tax cut” in their property taxes they realized in their old home is gone. Robey’s plan, at least offered a concrete cut that would be felt by everyone and , if one moved into a more expensive home, the tax on the new home would still be lower than it is today.
It appears that the Republican candidates running for County Council on the Republican ticket have come up with a plan to remedy this fatal flaw in the current tax law. From today’s Howard County Times.
Howard County Council chairman Christopher Merdon, a Republican from Ellicott City, said this week he might introduce a property tax relief plan offered by Republican candidates to the council.
But Merdon, who is running for county executive, said the cost to the county of the proposal must be determined before he will back it.
Republican County Council candidates Tom D’Asto, Gina Ellrich, Greg Fox, Tony Salazar and Donna Thewes unveiled the plan this week. It is aimed at giving homeowners a tax break when they buy a more expensive home in the county.
The plan would allow homeowners to transfer some of the savings they realize from the county’s cap on property tax increases to a more expensive home in the county.
The best I can tell from the article, basically if a homeowner sells his home and moves to a more expensive home in Howard County, the homeowner will be able to transfer the difference between the current taxable assessment and the full assessment of the home being sold to the home being purchased and immediately lower the taxable assessment on the new home. In other words, say my current home is valued at $300,000, but thanks to the cap on the rise in the taxable assessed value of the home, I only have to pay taxes on $250,000 of the home, a difference of $50,000. I then purchase a home for $500,000. Under current tax law as well as Feaga’s tax cut proposal, my first year property tax would be based on the full-assessed value of the home, $500,000. This new plan appears to say that I would be able to take the $50,000 between the full value and taxable value of my old home and transfer that to my new home, meaning my first year’s property tax in that new home would be based on $500,000-$50,000, or $450,000. I would still pay a higher tax on the more expensive home, but I would not lose the savings in my property taxes from my old home. It also gives people an incentive when they decide to move, to stay in Howard County.
I don’t know if there are any limits to how much of the savings on the old home you can transfer to the new home, which could change my mind, but on the surface this looks like a good way to remedy the problem with the current tax law. Of course, I have no hope it would ever be passed under the current County Council or signed into law by the current County Executive. But it is a bold plan and if the GOP manages to take control of the County Council and County Executive seat later this year, it is definitely a plan worth debating.
I did get a chuckle out of the last line of the article, this quote from HoCo Democratic Chairman Tony McGuffin.
“That’s a complicated scheme that will require some analysis to see who it helps and who it hurts,” he said. “So, no comment at this time, but I will look into it.”
Excuse me, but how would a plan that allows all homeowners to keep more of their own money if they decide to move from one part of Howard County to another part possibly “hurt” anyone? And how is it “complicated”? I was able to describe the plan pretty well, I believe, in one succinct paragraph. Am I wrong?
Back to the third paragraph of the story, I did notice the absence of Wayne Livesay as a candidate backing this plan. Now whether that is because he wasn’t even asked to join on to the plan or whether it is because he doesn’t support it, I do not know. Maybe someone who helped develop this plan or is in the know can tell me why Livesay is not included in the list of Republican candidates supporting this plan.
UPDATE (6:59pm): I guess I should have read the others before posting as they both already commented on this. Basically, Hayduke doesn’t like it because he thinks homeowners already get too many benefits of home ownership while renters don’t get enough while hocoblog likes the proposal and argues it also helps people who want to downsize their home in their later years. Read them both….
