Category Archives: taxes

Non-Incumbents Embrace Moon Country Club Bill

By Adam Pagnucco.

Delegate David Moon’s local bill on country clubs, which would have phased out a $10 million special tax break received only by country clubs with golf courses, did not get much love from elected officials.  The County Council did not support it (despite recently passing $53 million in budget cuts), the County Executive outright opposed it and Moon’s colleagues in the MoCo House Delegation killed it on a 17-7 vote.  This story is not quite over though because Moon has a statewide bill that would not eliminate the tax break but would limit country clubs’ assessed land value to one percent of market value.

Elected officials may not have embraced Moon’s bill but there is another group of people who absolutely loved it: non-incumbent candidates for office.  In the wake of the bill’s death, MANY candidates made clear they would support it if elected.  Here’s a sample.

Bill Conway (Council At-Large) tweeted in support of the bill.

Danielle Meitiv (Council At-Large) wrote in support of the bill on Facebook and criticized those who voted against it.

Andy Hoverman (House D-39) took out a Facebook ad supporting the bill.  Among the District 39 Delegates, Shane Robinson voted for the bill while Kirill Reznik and Charles Barkley (who is running for Council At-Large) voted against it.

Three non-incumbent candidates for Delegate in District 18 spoke out in favor of the bill on Seventh State’s Facebook page.

Emily Shetty said, “We have a budget deficit and are struggling to fully fund schools and other high priority services. I support David’s bill, and appreciate and would have supported the amendments he made to further tailor it as well. I don’t think it’s fair for private clubs to benefit from tax breaks otherwise unavailable to families and other employers in the state.”

Mila Johns said, “I 100% support David Moon’s bill. I have previously stated that on this page and I’m extremely grateful to Jeff Waldstreicher and Ana Sol Gutierrez for their principled vote. I read Al Carr’s reasoning and while I understand how he came to his decision, I disagree with it. It’s simply hard to believe so many in our county discarded a very reasonable way to raise revenue in a time of such painful budget shortfalls.”

Leslie Milano said, “Here’s where I stand: We cannot continue to subsidize a luxury restricted to the wealthy when taxpayers do not have access to the very thing they are subsidizing. The fact that only the very wealthy can access this subsidized luxury is extremely distasteful, especially when there is a great deal of poverty in our county as well as a budget shortfall of $120M affecting a variety of areas for every taxpayer. I would sponsor or co-sponsor a revised bill come January to ensure that clubs are paying their fair share. I agree with Ike Leggett that MoCo clubs shouldn’t be taxed differently than clubs in other counties, but I think we need to course correct MoCo clubs first with a local bill – as a sign of good faith – and in a second bill address remaining clubs in the state, which is David’s proposal. It will be easier to pass in two stages and moves us in the right direction.”

Among the District 18 Delegates, Al Carr voted against the bill while Ana Sol Gutierrez (who is running for Council District 1) and Jeff Waldstreicher (who is running for Senate) voted for it.

Several other candidates sent us statements in support of the bill.  They include:

Brandy Brooks (Council At-Large)

Our budget and tax policies should be built around the mutual concept of the common and each contributing their fair share. The common good should guide us in our decisions as well as our interactions with one another. It’s clear the special tax breaks for country clubs benefit only a few.  When wealthy special interests have a major influence over the policy discussions — even around common sense bills to create tax equity — our communities suffer. The county faces a huge budget shortfall, a severe housing crisis, income inequality, and education and opportunity gaps in our schools, to name a few of the pressing issues. Yet, the arguments made by those opposing the bill fail to address these needs. Instead, the country club lobbyist gave lawmakers an ultimatum: kill this bill or workers lose their jobs. All too often, hourly and low wage workers are the first to suffer when management says they need to tighten their belt.   Our policymaking should be focused on the common good. Lawmakers need to hear the voices of everyday people over corporate and big money interests. Our voices — the voices of everyday people — must be central in our policymaking, otherwise we further divide the county into the haves and have nots.

Hoan Dang (Council At-Large)

I strongly backed Delegate Moon’s bill to phase out the special property tax break for Montgomery County country clubs. I was disappointed that this bill was killed by special interests in this County.   This action is another example of why we need more efforts to take money out of politics, such as the public financing of all candidates in Montgomery County from School Board to the General Assembly.

Seth Grimes (Council At-Large)

I support ending special tax treatment for country clubs. Thanks to David Moon for taking a shot. We’ll try again in 2019.

Ben Shnider (Council District 3)

It’s common sense that clubs with annual dues in the tens of thousands of dollars should pay their fair share in taxes when we’re struggling to keep up with vital investments in transportation, school facilities, and other critical infrastructure. It’s not sustainable to keep raising taxes on working families in the County to meet our budgetary needs.

Vaughn Stewart (House D-19)

It’s a shame that this proposal to bring the taxes paid by country clubs in line with the far higher taxes paid by working families and seniors failed to generate wide support. The extra $10 million of revenue per year would be especially beneficial at a time when the county is cutting school funding to address a $120 million budget shortfall caused in part by wealthy residents strategically withholding capital gains. If we can’t afford to pay teachers and staff what they deserve, we can’t afford tax breaks for Montgomery County’s Mar-a-Lagos. I’ve spoken to thousands of District 19 residents since starting this campaign, and they want to know how I’m going to reduce their healthcare costs, create alternatives to traffic congestion, and fully fund their kids’ schools. Not one of them has asked me to continue subsidizing the golf games of our county’s wealthiest few. I look forward to helping Delegate Moon revive this bill next session.

Editor’s Note: All three District 19 Delegates – Bonnie Cullison, Ben Kramer and Marice Morales – voted against the bill.

Chris Wilhelm (Council At-Large)

I’m disappointed that our County and State representatives weren’t willing to stare down the country club lobbyists on this bill, especially when the County is getting ready to balance the budget by cutting from education and other important services. I see this issue through a racial equity lens: how can we claim to “resist” and stand up for our diverse community when so many of our officials were unwilling in this instance to help shift the tax burden from lower and moderate income residents to the ultra wealthy? This is why Montgomery County needs to stop patting itself on the back for being the most progressive place in the world; we aren’t.

*****

Additionally, institutional supporters of Moon’s bill include SEIU Local 500, MCGEO, National Nurses United, Montgomery County Young Democrats and the Sligo Creek Golf Association (which advocates for a public golf course).

Moon’s statewide bill, which limits but does not abolish the country club tax break, is headed to a hearing before the Ways and Means Committee tomorrow (February 27).  The Chair of the Committee, Delegate Anne Kaiser (D-14), voted against the local version of the bill.

Share

Moon Explains Failure of Country Club Tax Break Bill

By Adam Pagnucco.

In the wake of the failure of his bill that would have phased out a special property tax break for MoCo country clubs, the Facebook page of Delegate David Moon (D-20) saw an eruption of commenters expressing outrage, disbelief and mockery.  (Some raised the prospect of starting country clubs in their back yards to get similar tax breaks.)  In response to repeated requests, Moon analyzed the arguments against his bill and told the story of how it died.  Moon’s account contains references to a well-intended amendment by Delegate Eric Luedtke (D-14), who tried to narrow the bill to allow it to pass.  But he also describes the tactics used by a lobbyist hired by the clubs to kill the bill which demonstrate just how far some special interests will go to protect what they have been granted by government.  We intend to find out what that lobbyist was paid when reports come due.

We reprint Moon’s breakdown of the arguments against his bill below.

*****

Let me finally try and add some detail to this bill.

Argument 1 – Treating MoCo Differently Than Other Counties: The bill as originally introduced repealed these tax breaks for all of Montgomery County’s golf courses. State law doesn’t allow counties to asses property differently from one another, so the bill needed a constitutional amendment (subject to approval by voters), to give MoCo permission to repeal the Country Club tax breaks. Some people (including Ike Leggett) argued that MoCo shouldn’t be taxing country clubs differently from other counties. I found that argument unpersuasive, as MoCo has a majority of the state’s country clubs receiving this tax break. Additionally, MoCo loses far more money from this tax break than other counties. This is because in 2002, state law created a flat fee for country club assessments at $1,000 an acre. The problem with that is that in MoCo, many of our country clubs are sitting on land worth between $300,000 and $1 million per acre. You will not find that scenario in any other county, as their land is worth far less. So the flat fee seriously harms counties with valuable land. I offered one amendment to change the bill to simply say the county should decide the country club tax assessments, since they are the ones losing money from this. That amendment failed narrowly. But even still, some people simply had a problem with amending the state constitution to fix this problem. I honestly don’t care what the mechanism is to address the issue (we inserted slot machines into our state constitution, for example). I also have a statewide bill (HB 1340) that addresses this issue by changing the $1,000/acre assessment to 1% of market value, to account for the different land values in Maryland. A few of my colleagues suggested this issue should be taken up as a statewide measure and didn’t think it made sense as a local bill. But to be honest, one of the reasons I did both a local bill and a statewide bill is that it will likely be far more difficult to persuade lawmakers from around the state to fix this broken system. It now remains to be seen whether lawmakers who opposed my MoCo bill on the grounds of treating all the counties the same will now support the statewide bill. I will forward the state bill to the County Executive to see if it now addresses his stated concerns.

Argument 2 – Some Country Clubs Are In Poor Financial Shape: A common argument made against my bill is that of the 15 or 16 MoCo golf courses receiving this tax break, not all had wealthy members. Some argued that they were teetering on the brink of closure and would shut down if this bill passed. The country club lobbyist got all the janitors and service staff from the clubs to come to Annapolis and tell lawmakers they would all be fired if the bill passed. It was a true spectacle. I tried to counter this argument with amendments to make the bill more need-based. I proposed that we cap the tax discount at the first $400,000 per acre of market value, so that almost all of the clubs would be unaffected except for the super wealthy ones that charge huge initiation fees ($40,000 to $70,000 just to join). The country club lobbyist opposed this and other amendments. Basically, they were saying this would put courses out of business, but when we proposed amendments to make that not the case, the lobbyist opposed those fixes, too. Nice move! To be fair to my House colleagues, they never had an opportunity to vote for this version of the bill, because we didn’t adopt the narrowing amendments in subcommittee.

Argument 3 – Country Clubs Provide Jobs & Do Charitable Work: Another routine argument during this debate was that the country clubs employ people and let charities use their facilities. My response here is that plenty of entities employ people and do charitable work AND pay their taxes. But what this argument really turns on, is the idea that passing this bill would put the clubs out of business. As I noted above, I had an amendment to address that issue, but the country club lobbyist (who was formerly a State Senator who sponsored the bill for country club tax cuts) opposed the amendment. Come on now.

Argument 4 – Open Space & Those Evil Developers!: Yet another frequently cited argument against my bill was that the country clubs would close and lead to rampant development. The Sierra Club ought to go do a membership drive at country clubs, because apparently there are hundreds of open space conservation activists at country clubs, and we didn’t know it! Kidding aside, there are a number of reasons why this is a flawed argument. First, it assumes that country clubs will close BECAUSE OF this bill. As I noted above, I offered to amend the bill to exclude clubs that are not wealthy. Second, you would have to believe that a wealthy club with hundreds of acres of land worth $1 million/acre and waiting list to join would shut the entire club over a tax bill increase in the thousands. As some have noted, the wealthy clubs could simply add some members or sell a tiny piece of their land IF this was really an issue (and I doubt it is, with the amendments I offered). Moreover, the teetering country clubs are in trouble because there is a generational shift away from golf being a popular hobby. We didn’t throw money at Blockbuster or Tower Records to keep those businesses open when the market shifted on them, but then again, their customers were not wealthy and politically influential people. Additionally, nothing would stop the county from exercising its zoning and staging authority over a failed country club, and I would be willing to bet that’s exactly what would happen if one of these clubs failed. Let’s also be clear that even if you don’t like development, only ONE of these clubs was in the Ag Reserve, and Eric Luedtke offered an amendment which I supported to exclude that club (it was rejected). Many of the clubs inside the beltway are in areas of the county that are zoned for development (not open space), per the master plans that guide county development. If people have a problem with that, they should argue for extending the Ag Reserve to the DC border, near highway exits and transit (an absurd policy proposition). Given that many of these inside-the-beltway clubs are located in highly desirable school districts, this amounts to an argument for residents who are privileged enough to live in the W cluster keeping out others who also want the privilege to live there. The tax implications of this de facto development moratorium are far greater than $10 million a year for the county. Moreover, a supermajority of MoCo lawmakers also cosponsored the bill to drop 50,000 Amazon workers onto the county without worrying about the development implications. But remember once again, that there were amendments offered to take this development issue off the table.

When I first embarked on this effort to rein in country club tax breaks, I thought this would be a simple bill. Boy was I wrong! I now know more than I could’ve imagined about this issue, and the more I learn the more I’m convinced that this situation is seriously messed up. I’ll be back with more legislation on this issue next year, including looking at how we enforce the anti-discrimination provisions regarding country clubs and pesticide restrictions for clubs receiving these tax breaks (since the environmental, open space argument is being made!).

In the meantime, I encourage everyone to listen to Malcolm Gladwell’s fascinating podcast on this topic.

Share

MoCo Delegates Kill Moon Country Club Bill

By Adam Pagnucco.

Montgomery County’s Delegates have killed a local bill proposed by Delegate David Moon (D-20) that would have eliminated a special tax break for country clubs contained in state law.  Seventeen Delegates voted to kill the bill while seven voted in its favor.

Under current state law, the State Department of Assessments and Taxation (SDAT) is permitted to enter into agreements with country clubs possessing golf courses that would set the assessed value of their land at $1,000 per acre.  Moon’s bill would have phased out these agreements in Montgomery County subject to approval by voters.  The fiscal note on the bill indicated that the state government would have received an extra $1 million a year in tax revenue and the county government would have received an extra $10 million a year once the agreements were ended.  Despite the fact that the county just reported a $120 million shortfall, neither the County Executive nor the County Council supported the bill.

Since it was a local bill, the bill needed to clear Montgomery County’s House delegation before advancing to further votes by the county’s Senators and the full General Assembly.  That vote took place this morning.  After two unsuccessful attempts were made to amend the bill, Delegate Kathleen Dumais (D-15) made an unfavorable motion on it, which is tantamount to a no vote.  Delegate Sheila Hixson (D-20) seconded the motion.  Seventeen Delegates voted in favor of that motion and seven voted against.  The seven Delegates who voted in support of Moon’s bill were Moon, Ana Sol Gutierrez (D-18), Aruna Miller (D-15), Andrew Platt (D-17), Jeff Waldstreicher (D-18), Shane Robinson (D-39) and Jheanelle Wilkins (D-20).  We reprint the vote tally below.  In reading it, remember that a “Yea” vote is a vote to kill the bill.

Share

Revenue Shortfall Undermines Hogan’s Claims on Jobs

By Adam Pagnucco.

In 2014, candidate Larry Hogan ran on three issues: jobs, taxes and reforming Annapolis.  From 2015 through the present, Governor Larry Hogan has based his agenda on three issues: jobs, taxes and reforming Annapolis.  It’s a smart and focused way to campaign and govern and has largely (although perhaps temporarily) neutralized Hogan’s disadvantage as a Republican in blue Maryland.  But now the state budget is suffering from a revenue shortfall.  That calls into question Hogan’s standing on perhaps his biggest issue: jobs.

Recent polls show that jobs and the economy are the second most important issue for Marylanders, trailing only public education.  Accordingly, Hogan relentlessly promotes his jobs record in the press and social media, not so subtly using it as justification for his reelection.  But if employment was really surging, state revenues should be booming.  They’re not.

One of countless Facebook posts by the Governor on jobs.

Last week, the Board of Revenue Estimates, comprised of the Comptroller, the Treasurer and the Secretary of Budget and Management, voted to reduce the state’s revenue projection for FY18 (the current fiscal year) by $73 million.  The reduction included shortfalls of $92 million in income taxes and $33 million in sales and use taxes, which were partially offset by increases of $18 million in estate taxes and $17 million in corporate income taxes.

A summary of the shortfall released by the Board of Revenue Estimates.

Given the fact that the November income tax distributions were down by 26% in Baltimore County, 29% in Montgomery County and 30% in Howard County, it’s not surprising that the state’s income tax projections would take a hit.  In those three counties, tax planning by the wealthy to take advantage of next year’s federal tax cuts was probably a factor in their shortfalls.  The fact that Maryland has the highest percentage of millionaire households of any state in the country leaves it vulnerable to these kinds of revenue swings.

But that’s not all.  The $33 million decline in projected sales and use taxes does not relate to tax planning by the rich.  That’s a similar situation to what MoCo is experiencing as half the county’s shortfall comes from taxes other than income taxes.  Hogan is dealing with the same problem as MoCo’s county elected officials: for all their claims that the economy is strong, healthy economies tend to not produce significant revenue shortfalls.  Recent employment estimates are often revised substantially soon after their release, but current year revenue declines are something that governments have to deal with in the near term.

Here’s what Comptroller Peter Franchot had to say about the state’s falling revenue projections:

The revenue projections that have been brought to this Board for approval were meticulously and carefully crafted based on what we know … and the trends we are seeing … and the data we are receiving. Once Congress approves a final version of the tax reform legislation, our experts here will work diligently to determine its impact on Marylanders’ income and our state’s fiscal future and propose revisions to our revenue estimates where appropriate.

In other words, we’re doing the best we can with the information we have. But, here’s what we do know and here’s what the numbers tell us. While we have undoubtedly made considerable progress after the crippling effects of the 2008 Recession, with an unemployment rate hovering around 4 percent and stock market trends that are headed in the right direction, the fact of the matter is that thousands of Maryland working families and small business owners who were affected the most by the economic crash nearly a decade ago haven’t fully recovered.

We continue to see that with declining sales and use tax revenue. With wages and salaries that are lackluster at best. Even those who are employed with good-paying jobs have – in more cases than not – elected to put their disposable incomes in their piggy banks instead of putting money back in our local economy. And who can blame them?

With all the uncertainty that’s being produced by Washington at an almost daily basis, coupled with the continued fiscal and economic challenges that our state and our communities face, it’s understandable why so many of our citizens remain hesitant and timid about how they spend their hard-earned incomes.

Let’s remember that Franchot has a famously cooperative relationship with Hogan.  Even so, Franchot is saying that the state’s economy has not fully recovered from the Great Recession – which is exactly what we wrote about MoCo before the revenue crash.

This is the opposite of Larry Hogan’s message that he has been great on jobs.  His opponents are sure to take notice.

Share

Is MoCo’s Budget in Trouble?

By Adam Pagnucco.

Montgomery County’s $120 million budget shortfall has set off political fireworks this election season, including attacks from Delegate Bill Frick (D-16), who is running for Executive, and Republicans who question how taxes could be going up while revenues are going down.  County Council incumbents pooh-pooh it, insisting that the budget decline is unremarkable and the economy is strong.  County Executive spokesman Patrick Lacefield, who once predicted that any loss of the county’s $30 million in liquor profits would cause a big property tax hike, now says that the $120 million shortfall is “pretty small” at just 2.2 percent of the county’s budget.

What is going on here?  Is MoCo’s budget in trouble?

First, the incumbents are right to point out that mid-year corrections, including budget savings plans, are not uncommon.  Between FY08 and FY11, the County Council approved five mid-year cut packages ranging from $30 million to $70 million each due to the Great Recession.  In FY16, the council approved a $54 million savings plan associated with the U.S. Supreme Court’s Wynne decision and disappointing income tax receipts in the prior year.  While mid-year cuts happen occasionally, it’s important to note that their history indicates that they are often – but not always – produced by looming economic problems.

So what’s causing this one?  No one is totally sure yet, but there seems to be two phenomena at work.

Declining Income Tax Payments from the Wealthy

In Maryland, the state collects income taxes on behalf of local governments and remits them in periodic distributions.  Part of MoCo’s problem originated in its November income tax distribution from the state, which includes extension filers who tend to be disproportionately very wealthy.  It’s difficult to forecast income tax payments from wealthy people because their dependence on capital gains and business income can be volatile.  The chart below from the state’s Bureau of Revenue Estimates contrasts the annual change in average federal adjusted gross income between all MoCo taxpayers (pink bars) and the top 100 MoCo taxpayers (blue line).  Income change for all taxpayers usually varies by single digits each year while income for the super-wealthy almost always varies by double digits.  This creates serious forecasting challenges for the county government since the super-wealthy have a material impact on its budget.

One relevant fact is that the November distribution may be down by 29% in MoCo but, according to the state, it is also down by 30% in Howard County and 26% in Baltimore County.  One thing these three jurisdictions have in common is that they all have substantial concentrations of very wealthy people.  That suggests that some of MoCo’s problem is not specific to the county but rather to variations in the incomes of the super rich.

Why is this happening?  One explanation lies in capital gains income.  Council analyst Jacob Sesker writes:

To a large degree, that volatility is the result of the year-to-year variations in the capital gains income of a small number of County residents. Illustrating this point, part of the projected FY18 decline in income tax revenue can be traced to a sharp drop in the capital gains of the County’s top 50 taxpayers, who realized gains in tax year 2016 that were 50% of the gains realized in tax year 2015, resulting in $21 million less in County income tax revenue (Revenue Administration Division of the Maryland Comptroller). Staff’s review of tax return data published by the Comptroller indicates that roughly 1.8% of Montgomery County returns report income of $500,000 or greater. On average, these returns explain more than half of any year-to-year increases in income tax revenue, and explain more than 100% of any year-to-year declines in income tax revenue.

Another factor could be the tax bills being considered by Congress, which contain numerous large cuts for wealthy individuals and corporations.  The super wealthy could be deferring capital gains and business pass-through income to next year when they would be subject to significantly lower rates.  If true, that would mean less income tax revenue this year but perhaps more next year when the deferred income is reported.  That’s just a theory but it can’t be ruled out.

Broader Economic Weakness

There are other facts that can’t be explained by the tax planning of the super wealthy.  First, FY17 (the year of the 9% property tax hike) closed out with $25 million less than expected.  Second, the county is writing down $206 million over the next six years in property taxes, energy taxes, transfer taxes, recordation taxes, telephone taxes and hotel taxes in addition to a $212 million income tax writedown.  The energy tax revision alone is $100 million over six years.  The reason for that is unclear, but it’s worth remembering that since commercial energy users pay roughly double the tax rates of residential users, some assumptions regarding employer energy use may be operative here.  It seems unlikely that a “strong economy” would produce such broad, multi-tax writedowns of the kind just put forth by the county.

What’s the bottom line?  Over the years, we have learned that under most circumstances, economic trends usually matter more than singular events.  One good year should not cause irrational exuberance and one bad tax distribution should not cause panic.  Whether the recent shortfall turns out to be meaningful or not, MoCo’s serious budgetary challenges are long term in nature.  They relate to decade-plus trends of lagging growth in employment and income, repeated funding of ongoing spending with one-time revenue sources and the county’s recent passage of large tax hikes and expensive employment laws at the same time, a unique combination among Washington-area jurisdictions.  That is on top of any targeting of Maryland and general economic insanity by Congress.  The big question is not about one tax distribution from the state but whether a combination of all these long-term factors will catch up with MoCo in a really bad way in the next couple years.

That’s a question for the next Executive and County Council.

Share

Budget Cuts and Hunger in Montgomery County

Today, Seventh State is pleased to present a guest post by Manna Food Center CEO Jackie DeCarlo. Manna is a nonprofit dedicated to ending hunger in Montgomery County through food distribution, education and advocacy.

The holiday season is upon us, which means hunger relief organizations all over Maryland are welcoming an uptick in volunteerism and donations. While the individuals who organize food drives, pick up and deliver food, and volunteer at food pantries are critical to addressing hunger in our communities, their efforts will be undermined if threats to our social safety net currently working their way through Congress come to fruition.

Specifically, the federal tax plan headed for passage—and cuts to vital programs like the Supplemental Nutritional Assistance Programs (SNAP) that will likely accompany the price tag for that plan—will cause more Marylanders to tumble further into the kind of poverty that comes with inevitable hunger.

Even though Maryland is the wealthiest state in the nation, one in eight households struggles against hunger and programs like SNAP improve the lives of those neighbors on a daily basis. In Montgomery County, one of the richest counties in our state, one in three of our schoolchildren is food insecure, and there are large pockets where high unemployment and poverty rates prevail. Every day at Manna Food Center, we see the value of SNAP and other social safety net mainstays such as housing assistance programs and low-income tax credits.

A case in point is Sasha, a woman Manna has had the honor to serve. Sasha immigrated to the United States ten years ago, married and had a child, then was forced to leave an abusive husband. She didn’t have a job and found it hard to provide for her children, but the food she received from Manna helped her make it through an incredibly difficult time in her life, and eventually stand on her own.

There are countless stories like Sasha’s, which is why it so upsetting to see the budget Congress is debating on the heels of untested approaches to tax “reform.” Cuts being considered would likely cause millions of Americans to tumble further into the kind of poverty that comes with inevitable hunger. Regardless of political affiliation, there seems to be agreement that more responsibility is falling to local governments and local businesses.

Already in Montgomery County, our local government is trying to do its part to address hunger and poverty. This year, elected leaders worked with the food assistance community to develop a five-year strategy to reduce the number of food insecure neighbors by 22 percent. The plan aims to address the root causes of poverty and economic disparities through programs such as workforce training and youth skills building that ensure no one is left out of our county’s rapid development and growing prosperity.

The council also recently passed, and the County Executive signed, legislation securing a $15 minimum wage, a great step toward giving people financial autonomy – and one Governor Hogan should emulate so all of the state’s low-wage workers can enjoy a boost in earning. Even with those positive measures, however, the reality is that the minimum wage increase won’t be enough to raise people out of poverty, and none of our local government’s commendable plans amount to a silver bullet that will end hunger.

Therefore, the commitment of the local business community will also be required. Food businesses, in particular, can play an important role in alleviating hunger throughout Maryland. Through Manna’s Community Food Rescue network, Montgomery County farms, grocers, food service companies and restaurants donate unsold and surplus food that gets matched through an app and delivered by volunteers to food assistance organizations. In its first two years, the CFR network has recovered more than 2.3 million pounds of food—the equivalent of 1.9 million meals. As more businesses recognize the importance of getting food to people who need it, instead of to the landfill, the potential impact of food recovery programs here and across the state is tremendous.

Even with these positive local steps, ending hunger and poverty will be impossible without strong federal programs like SNAP, which helps ensure low-income families have enough to eat. SNAP benefits equal about $1.40 per person per meal, and if the budget passes with proposed SNAP reductions, food assistance organizations won’t be able to fill the gap.

While we have many reasons to be grateful this holiday season, I am concerned about what we stand to lose. The commitment of volunteers and donors who do their part to end hunger in communities nationwide must be matched by the commitment of businesses and, especially, policymakers at all levels of government. Rather than watching idly as a tax plan that does significant harm to those in greatest need gets passed, our local and state leaders should emphatically convey to Congress and the administration that their recklessness is unacceptable, and they will fight for the preservation of our social safety net.

Jackie DeCarlo is the CEO of Manna Food Center, a nonprofit dedicated to ending hunger in Montgomery County through food distribution, education and advocacy.

Share

Moon Country Club Bill Could Generate $10 Million for MoCo

By Adam Pagnucco.

A local bill introduced by Delegate David Moon (D-20) that would end property tax breaks for country clubs would eventually generate $10 million a year for Montgomery County Government according to General Assembly analysts.  That’s welcome news for the county, especially considering its current budgetary difficulties.

Under current state law, the State Department of Assessments and Taxation (SDAT) is allowed to strike agreements with country clubs having golf courses to cap the assessed value of their land.  To be eligible for such agreements, the clubs must have at least 100 members who pay dues averaging $50 or more annually for each member; restrict use of their facilities primarily to members, families, and guests; have at least 50 acres of land; and have a golf course with at least 9 holes and a clubhouse.  In practice, the agreements limit assessed land values to $1,000 an acre.  In return for the assessed rate, a club with an SDAT agreement must agree not to sell its land for subdivision and to not discriminate on race, color, creed, sex or national origin.  If a club with an agreement does sell its land for subdivision, it must pay back taxes equivalent to what it would have been paying without an agreement.

Not long ago, your author asked SDAT for all of its agreements with country clubs in Montgomery County.  SDAT sent us ten of them but we later learned that there are actually fifteen of them in the county.  One of them was signed in 1980 and three more were signed in 1981; all four of these are fifty year agreements.  Two more were transferred from prior owners.  One agreement, for the Lakewood Country Club in Rockville, was signed in 2017.  In tax year 2016, when the agreement was not effective, the club’s 175 acres had an assessed land value of $1.94 million.  Once the agreement takes effect, the club’s assessed land value will be $175,000 – a 91% reduction.

Moon’s local bill would abolish such agreements with country clubs in Montgomery County as of their expiration or June 30, 2029, whichever date is earlier.  Because Maryland’s state constitution requires uniform rules for the assessment of land, Moon’s bill takes the form of a constitutional amendment carving out MoCo country clubs and golf courses from that requirement.  The amendment would have to be approved by voters.  We understand that Moon may also introduce a statewide bill to deal with SDAT agreements everywhere.

The fiscal note on Moon’s bill indicates that MoCo country clubs with SDAT agreements have a combined 3,000 acres currently assessed at $3 million.  In the absence of the agreements, the fiscal note estimates that the club’s assessed land value would be $983.3 million.  So once the agreements are all gone by Fiscal Year 2030, the fiscal note estimates that the state would collect an additional $1 million a year in property taxes from the clubs and the county would get an additional $10 million annually.

That’s right, folks – if the country clubs simply pay property taxes at the same rate the rest of us do, the Montgomery County Government would get an extra $10 million a year.

Delegate Moon’s country club bill is the biggest no-brainer of all time.  There is no justification for the richest of the very rich to get a property tax break that no one else does.  And if they are required to pay the same as everybody else, the county government would get a nice revenue bump to help it deal with our significant and increasing needs.

We hope every single MoCo Senator and Delegate will join David Moon and support his bill.

Share

GOP Tax Bills Discriminate Against Maryland

By Adam Pagnucco.

Much has been written about the tax bills passed by the U.S. House and Senate in recent weeks.  Overall, both bills offer small tax cuts to the poor, modest ones to the middle class and large cuts to the wealthy and corporations.  But in order to partially offset the massive tax cuts going to those at the top, the bills do something else.

They discriminate against taxpayers in Maryland.

Why do they do that?  One key feature of both bills is that they abolish the ability of individuals to deduct state and local income taxes from their federal incomes.  (Property tax deductions would still be allowed up to $10,000.)  According to IRS data for Tax Year 2015, U.S. federal taxpayers deducted a total of $334 billion of state and local income taxes from their incomes, more than the amounts they deducted for mortgage interest ($278 billion), charitable contributions ($222 billion), real estate taxes ($187 billion) and state and local sales taxes ($17 billion).  Abolishing the state and local income tax deduction hits people who itemize their deductions and pay significant amounts of state and local income taxes.  Marylanders are targeted on both those measures.

Itemizing Deductions

According to the above IRS data, 46% of Marylanders itemized their deductions on their federal tax returns in 2015.  That’s the highest rate in the country, far surpassing the national rate of 30% and red states like Arkansas (22%), Mississippi (23%), Louisiana (23%), Texas (24%), Alabama (26%), South Carolina (27%) and Georgia (33%).

State and Local Income Tax Deductions

In terms of state and local income tax deductions per return (including non-itemized returns), Marylanders ranked fifth in the nation at $4,217 per return.  Maryland trailed New York, D.C., Connecticut and California.  Virginia ranked tenth, indicating that the abolition of this deduction will hit the Washington, D.C. metro area particularly hard.  The states least impacted are mostly red states and those with little or no income taxes.

Inside Maryland, the impact will be felt differently across the state.  That’s because residents of some jurisdictions pay much more in state and local income taxes than others.  According to 2015 income tax data from the Comptroller, MoCo and Howard County residents pay by far the most state and local income taxes in Maryland.  Residents of many parts of Western Maryland and the Eastern Shore pay the least.

Consider this.  If you itemize your deductions, are paying $5,000 in state and local income taxes – roughly the average in Maryland – and your effective federal income tax rate is 15%, you will owe $750 more to Uncle Sam because of the abolition of the state and local income tax deduction.

Does that mean you will owe more federal taxes overall?  That depends.  If you are wealthy, you could get huge offsetting cuts because of changes to the top income tax brackets and tax cuts on pass-through income from your businesses.  If you are poor or middle class, you could benefit from an increase in the standard deduction and an increase in the child credit, but that could be offset by an elimination of the personal exemption.  An analysis of the Senate bill two weeks ago by the Institute on Taxation and Economic Policy found almost all of the tax benefits from that bill going to the top quintile of Maryland taxpayers.  Changes prior to the Senate floor vote and in conference committee may tweak the details but not the overall impact.  And it could get worse: wealthy Republican donors are already complaining that their tax cuts are not big enough.

There are many evils in the GOP’s tax bills: redistribution to the one percent, big tax breaks for multi-nationals who ship jobs overseas, losses of insurance coverage under the Affordable Care Act and more.  But for Marylanders, the additional slap in the face is that the bills shift the federal tax burden away from states like Texas, South Dakota, Alaska and Mississippi and onto residents of the Free State.  All Marylanders, including Republicans, should oppose that.

Share

Stop Giving Robin Ficker More Ammo

By Adam Pagnucco.

Right about now, the happiest man in Montgomery County lives in Boyds.  He is 74, a huge sports fanatic, a long time attorney, a former state Delegate, a perpetual candidate and a tireless activist.  He loves the County Council because some of its members give him endless material for use in his never-ending demagogic campaign to weaken and ultimately paralyze county government.

Yes folks, we are talking about the notorious political heckler Robin Ficker.  And he must be jumping for joy at the news that some members of the council are considering a possible new soda tax.

Ficker has been running for office and placing charter amendments on the ballot, mostly intended to limit taxes, since the 1970s.  The huge majority of his amendments have failed, often because the political establishment labeled them “Ficker amendments” to exploit the national infamy of his heckling at Washington Bullets games.  One exception was the razor-tight passage of his 2008 charter amendment mandating that all nine Council Members vote in support of exceeding the charter limit on property taxes.  But Ficker has never had more ammo than in the last four years and he has used it to push his anti-government agenda.  Consider what has happened.

The council’s approval of a large salary increase for its members in 2013 and its passage of a 9% property tax hike in 2016 gave Ficker’s term limits charter amendment momentum.  Some Council Members then used their campaign funds to finance a lawsuit to keep term limits off the ballot, which failed.  Council Member Nancy Floreen’s “exasperated” and “defensive” performance in a television debate with Ficker and Council Member George Leventhal’s comparison of term limits supporters with Brexit voters didn’t help.  Ficker predicted term limits would pass by twenty points; instead, they passed by forty.

Robin Ficker thanks MoCo voters for giving him his biggest political win ever.

That’s not all.  Ficker has enrolled in the public financing system established by the council for his latest Executive run.  And he requested the county government’s email lists after another resident obtained them under the Public Information Act.  Any competent campaigner – maybe even Ficker – should be able to use those thousands of emails to raise enough money to qualify for public matching funds.

And now we have news of the soda tax, which prompted gleeful self-promotion by Ficker in Bethesda Magazine’s comment section.  Expect a Facebook ad soon.

Your author does not enjoy writing this column because we find merit in this particular tax.  Sugary drinks and soda are public health menaces, especially to children.  The intended use of the money for early childhood programs is a good idea.  And the current tight budget does not give any quick or easy options for funding undeniable, but expensive, priorities like early childhood education.  But the counter-argument from Ficker, who calls Council Members “tax increase specialists,” is obvious.  “They’re not listening to you,” Ficker will tell the voters.  “You told them no more tax hikes and they’re going to do it anyway.”  Even Leventhal, who has voted for numerous tax hikes and has done as much to promote public health as any Council Member ever, has come out against the new tax.

The danger here is not that Ficker will be elected.  Voters made that mistake once all the way back in 1978 and have never come close to repeating it since.  The real problem is the next charter amendment that Ficker will inevitably introduce after his latest election campaign fails.  Whatever else Ficker is, he is an astute student of Maryland county tax policies.  He is fully aware of the taxation and spending limits in the Prince George’s County charter, such as the requirements that the property tax rate may not exceed 96 cents per $100 of assessed value and that bond issues, new taxes, other tax increases and some fee increases be approved by voters.  He is also aware of provisions in the state constitution and several county charters that forbid legislative bodies from adding spending to executive budgets.  Indeed, some of his past charter amendments have been variants of such policies.

It’s one thing to raise taxes during terrible economic downturns as the county did in 2010.  That simply had to be done.  It’s a very different thing to discuss new discretionary tax hikes in times when voters are not convinced that they are absolutely needed.  If the council would like to have more money available for worthy programs, it should focus on growing the economy, stop adding ongoing miscellaneous spending financed by one-shot revenue sources, redirect cable fund money to purposes that actually benefit the public and restrain some parts of the budget to finance expansions of others.  Doing those things will free up tens of millions of dollars, and maybe more, over time.  But constant talk, and occasional passage, of discretionary tax hikes will only help Ficker place a Prince George’s-style anti-tax doomsday charter amendment on the ballot.  Should such a thing pass, no soda tax will save us.

Hence a warning.  If you give Robin Ficker enough ammo, even he will eventually hit the target.

Share

A Reply to Nancy Floreen on MCPS Funding

By Adam Pagnucco.

Thanks to Council Member Nancy Floreen for writing about MCPS funding in recent years in response to my blog post.  First, a note of appreciation.  While we may disagree about MCPS, we agree wholeheartedly on the issue of economic growth, which is the anchor for the county budget.  The political winds on growth shift back and forth in county politics over the decades, but Floreen has consistently pushed an economic development agenda.  She was for jobs before jobs were cool!  All the things the county has done right in economic development – and there have been a few of them – have Floreen’s fingerprints all over them.  It’s one reason why your author admires her and is sad to see her leave the County Council.

Let’s begin with areas of agreement.  First, Floreen is absolutely right about the terrible days of the Great Recession.  The county had not faced anything like it since the 1930s.  Everything had to go on the table in those days – spending cuts, layoffs, furloughs, broken collective bargaining agreements and an energy tax hike – because the alternative was default.  Floreen was Council President in 2010, the worst year of the recession.  She, the County Executive and her colleagues saved the county from fiscal disaster.  That achievement should not be forgotten.

Second, Floreen mentions the state’s teacher pension shift as a stress point on county finances.  Again, she’s absolutely right.  For many years, the state’s payment of teacher pension benefits was the one state program that disproportionately benefited Montgomery County.  That’s because our high cost of living as well as our prioritization of schools leads us to pay higher teacher salaries than the rest of the state, which results in higher pensions.  In 2010, nearly all of MoCo’s state legislators running for election promised not to shift pension costs to the counties.  But in 2012, Governor Martin O’Malley pushed a plan to do exactly that and most of our state legislators voted for it.  The result is that Montgomery County pays roughly $60 million a year for teacher pensions now, more than any jurisdiction in the state.  Compare that to the size of last year’s property tax hike, which was $140 million a year.  No matter what is said about the county, the state should not be let off the hook.

Now to the areas of disagreement.  It’s interesting that Floreen says our blog post is misleading but does not actually refute any of the data on which we rely.  She simply picks other data and disagrees with our characterizations.  We are sympathetic to her problem: it’s hard to refute data that happens to be true!  One thing she contests is our choice of FY10 as a base year for comparison.  We picked FY10 because it was the peak year of overall county spending before the Great Recession fully kicked in.  So comparing FY10 to FY16, the year before the tax hike, is valid because it’s a peak-to-peak comparison that includes both the cuts to departments in the early part of the period as well as the restoration that occurred afterwards.

She also disagrees repeatedly with our referring to MCPS as going through austerity.  Our basis for doing so was the county’s local dollar spending per pupil, which comes from county budget documents and was not contested by Floreen.  In nominal terms, here is the county’s local spending per pupil from FY06 through FY17.

The data shows that the county cut its local per pupil contribution to MCPS for three straight years and froze it for four straight years.  This period greatly exceeds the length of the Great Recession.  The local per pupil contribution went up after last year’s property tax increase.

Last year’s per pupil bump looks significant, but here is the same data adjusted by the Washington-Baltimore CPI and presented in real terms using 2017 dollars.  (We estimated 2017 inflation at 2.02%, the average rate of the preceding years in the chart.)  Clearly, even with the tax hike, the county’s local-dollar commitment to schools is not what it once was.  And the CPI underestimates major cost drivers for the schools, such as the costs of serving rising numbers of students who live in poverty and need language services.

Floreen then talks about the county departments that were cut during the recession.  She’s right: they were cut.  But after the recession ended, most of them were restored to levels exceeding what they were before the recession.  Meanwhile, county dollars for MCPS were cut by $33 million between FY10 and FY16.  Floreen doesn’t deny that, but she notes that local dollars aren’t the only source for MCPS’s budget.  The schools get plenty of state money too.  Floreen says this:

What really matters is the total MCPS budget, not the State share versus the local share. The higher State spending for MCPS in recent years reflects that the State’s funding formulas, at long last, are starting to recognize our students’ actual needs, as shown in our higher ESOL and FARMS populations. The State aid increases, which were long overdue, enabled us to provide continued strong support for MCPS during the Great Recession without further decimating every other function of government.  Why is that not a good thing?

Floreen is conceding a central point of our original post which is reinforced in the per pupil data above: the county depended on state aid to keep MCPS afloat while it restricted its own contributions to the school system.  Meanwhile, MCPS enrollment grew from 140,500 to 156,514 between FY10 and FY16, an 11% increase.  The Great Recession by itself can’t be cited as a justification for restricting county dollars for schools because the restrictions continued long after the trough of the recession had passed.  Indeed, fifteen other counties increased their local per pupil contributions after the recession ended, including nine controlled by Republicans.  The message here is, “The state was paying for our schools so we didn’t have to increase county per pupil spending on them.”  Is that “continued strong support for MCPS” as claimed above?  Is it satisfactory for parents and voters?  Let the readers decide.

Finally, Floreen repeats her longstanding point that last year’s 9% property tax hike was intended to support MCPS.  That’s true: MCPS did get a big share of that money.  But so did the rest of the government.  Last year, we laid out how the county could have cut the tax hike in half, still given MCPS all the money requested in the County Executive’s budget and done it without spending cuts to other agencies.  County Executive Ike Leggett, who originally proposed the tax hike, asked the council to cut the rate increase in half after the General Assembly passed a law easing the county’s liability from a U.S. Supreme Court decision on income taxes.  But the council chose to keep every penny of the original tax hike and spread it across every agency instead.  That’s not an Education First budget – it’s an Everything First budget.  The result of the tax hike was a tremendous boost for the 40-point triumph of term limits at the ballot box.  Even the council’s own spokesman at the time now says the tax hike was unnecessary and is vowing to stop another one if he is elected to Floreen’s open seat.

Look folks.  We get this is tough medicine.  We understand that elected officials don’t like to be criticized, especially around election time.  And we understand that Nancy Floreen, a Council Member we respect, would like to go out on top.  But it’s important to understand the past to prepare for the future.  The schools need small, steady increases in per pupil funding to deal with their challenges.  There can no longer be wild swings between extended periods of per pupil cuts and freezes followed by huge tax hikes intended to undo the effects of those cuts and freezes.  To fund MCPS fairly without raising taxes, the county will have to restrain the overall growth of the rest of the budget to pay for it.  There cannot be any more Everything First budgets.  With four Council Members leaving and the Executive race wide open, it will be up to the next generation of county officials to chart a better way forward.

Share