Will big tax cuts bring population back to Baltimore?
Last week the Cenus reported that Baltimore lost 30,000 people from 2000 to 2010, dealing a crushing blow to folks who had hoped for evidence of a population turnaround. As I blogged, taxes and schools are a major disincentive to live in the city. So is crime, many commenters added.
But other cities have been in Baltimore's position and managed to bring residents and investment back within city limits. Boston and San Francisco, for example, say Stephen J.K. Walters and Louis Miserendino. And Baltimore can become just as successful and populated as they are if Baltimore mimics them in cutting property taxes -- substantially, they argue in a new economic periodical, Maryland Journal, published by the Maryland Public Policy Institute.
No, the politicians didn't cut the tax. Voters did, through California's Proposition 13 in 1978 and Massachusetts' Propisition 2 1/2 in 1980. Walters & Miserendino:
In California, where the inflation of the mid-1970s had led to crushing real estate tax burdens, voters overwhelmingly approved Proposition 13 in 1978, capping local property tax rates at one percent of properties’ 1975 values and limiting subsequent increases in assessments to two percent annually (until a property was sold). Overnight, San Francisco had to chop its tax rate by almost three-fifths. Elected officials predicted a budgetary disaster of biblical proportions. Yet almost immediately, and in spite of “stagflationary” macroeconomic conditions as bad or worse than those we are now experiencing, the city experienced a downtown building boom that broadened its tax base, staunched job losses, and began the process of repopulation and recapitalization that would make it a superstar.
In Boston, they say, sharply lower taxes also caused the turnaround:
Massachusetts voters passed Proposition 2 ½ in 1980, forcing Boston to cut its effective property tax rate by an estimated 75 percent within two years. Boston had lost a remarkable 12 percent of its population between 1975 and 1980, but the tax cap instantly made the city more hospitable to investment in physical capital. In San Francisco, that soon attracted employers and residents, and Boston, too, was set on a path of greater prosperity, increasing safety, and enhanced quality of life.
Read the paper. Walters, an economist at Loyola University, and Miserendino, a social studies teacher at Calvert Hall, argue that the city should amend its charter to cut property tax rate several years hence by more than half -- to 1 percent. That's below Baltimore County's rate. Knowing the rate would be slashed and knowing it would be difficult to amend the charter again to raise it, they say, people would move back to the city.
Here is my colleague Jamie Smith Hopkins' recent interview with Walters on this idea.
Comments
Please pursue this story during the election year. It has become so painfully clear that there is not the political will in the City to make this important and necessary change. It will be scary for some, but it beats the slow death Baltimore is currently experiencing. Raising revenue in the City starts with raising the population. Until that happens, it will never have the resources needed to maintain a quality city.
Posted by: Charlie | February 16, 2011 8:14 AM
Five years ago I informed my family of my intent to move back into the city. When they asked why, I expected to hear about crime or schools, but instead the question was, "Why would you do that? The property taxes are so high!"
Let's not become the Detroit of the east coast. Get this done & turn this ship around.
Posted by: Charmed City | February 16, 2011 9:05 AM
There are exactly two reasons I am leaving and will never locate my family in Baltimore.
1.Culture of crime and non-enforcement of public safety - the police are nearly as much of the problem as criminals. Criminal behavior is bad enough, but police non-enforcement is worse. Uncertainty, like in economic matters, is a major disincentive.
2. Schools aren't consistently good. Yes there are one or two good schools and a many decent teachers, but they are few and far between, and exactly which schools are good, can I get my kids into them, will they stay good throughout my kids school years? Those are all questions that Baltimore schools do not inspire even remotely positive response. Again the uncertainty is a major disincentive.
Taxes have nothing to do with it.
Posted by: Luke | February 16, 2011 9:32 AM
Last year I purchased my first home in Towson. I can say that without a shadow of a doubt, I would have rather lived in Baltimore City but the property taxes were outrageously high and the fact that my tax money would go to support an awful school system and second rate civic services were nonstarters.
Posted by: bryanintowson | February 16, 2011 9:46 AM
other cities have been in Baltimore's position and managed to bring residents and investment back... during a time when the national population demographics converged with a the tech boom (in both places) as well as a generalized economic boom.
During those years all manner of enterprises liked to take credit for prescience and inherent capability for events far more easily explained as sheer luck and coincidence.
That said, Baltimore must lower the tax RATES to be aligned with it's neighbor jurisdictions... but Baltimore also needs to adjust about twenty other factors to be aligned with it's neighbor jurisdictions.
Bottom line: The RE tax rate is symptom of the real problem. The objective has to about attracting middle class INCOME tax paying citizens into a redevelopment environment of more middle class home districts like Mt Washington, Northwood and Lauraville... even (and necessarily) as that same effort displaces the net consumers of taxes and public services currently being cared for.
Posted by: MrRational | February 16, 2011 11:12 AM
Were SF and Boston demographically similar to Baltimore before they cut their taxes? They do not have that reputation now. It seems like a necessary step to cut taxes, but we can't expect it to miraculously wipe out all of our cheap, degraded housing.
Posted by: Joseph | February 16, 2011 11:32 AM
While property tax rate cutes are needed I highly doubt we will ever see them. Why? Because our local politicians don't have the courage to make the touch budget choices that would be needed to go along with such cuts.
Posted by: Paul | February 16, 2011 2:13 PM
Lower property taxes would be essential to the city's recovery. But let us not kid ourselves in thinking that it would happen overnight. It is not as if there are herds of people waiting to flush into the city the second the taxes take a momentary dip.
Posted by: hampdenjames | February 16, 2011 2:27 PM
From 2000 - 2010 there were 2,845 homicides in Baltimore. Obviously those people were not all residents, but it is clearly apparent why 2,000 residents left (although I'm sure most of which you'll find in the cemetary.)
Apparently the other 28,000 residents had issues between murders, crime, the piss poor education system, and flat out rude people. I live in AA County and won't move to the city ever. High taxes, liberals trying to pass 'bottle' taxes, former Mayors adding a $3 per cell phone tax to pay for special projects, and parking garages charging a $20 a month hidden tax to fund the poor excuse to fill someones pockets with cash Circulator.
It's not just one reason people don't want to live in the city. The current city management should go jump in the harbor with a ton of bricks on their feet, then maybe someone will come in and do something right instead of turning a blind eye to the city's real issues.
Posted by: Phillip | February 16, 2011 3:21 PM
@hampdenjames - True, but there are some of us who currently rent in the city who would be much more willing to consider buying at a more reasonable tax rate. I don't have the money to buy where I live now, so I would look in a more affordable neighborhood, which could potentially benefit from the investment.
Posted by: MarkT | February 17, 2011 9:10 AM
Crime increased with decling population. It is hard for me to believe that it pure coincidence that in 1990's when Baltimore saw its highest crime rates, that property taxes were also at there highest along with residents fleeing the city. Baltimore suffers from high concentrations of poverty, a lot of less desirable things come from this including problem schools and crime. The reasons are many. Healthy cities tend to be diverse, dense, and more affluent. This creates jobs, larger tax base and it is positive for ALL of it residents. Baltimore will not see any sustainable improvement without attracting new residents and businesses. This needs to be the #1 priority. Outrageously high taxes clearly hinder this.
This process does not need to hurt. The city should make a commitment to lower taxes by .05 each year for 20 years. In the mean time create a 10 year significant tax phase-in for all new city homebuyers. Tax phase-ins are not painful and if they result in positive growth and increased demand, the city benefits from an increased tax base, and immediate transfer tax dollars.
Posted by: Dunn | February 17, 2011 10:24 AM
the city does not need to charge new residents any RE tax whatsoever, because there is more than enough RE taxes already coming in . They should simply say anyone who moves into the city for the next 10 years or what have you will never pay any RE tax ever, or at least until the population reaches some mimimum threshold estimate. This would still leave the city in far better condition than with the status quo perpetual loss of population.
Once you get the population up, then think about reducing taxes for older residents and phasing in those lower taxes for new residents.
Posted by: Lee | February 23, 2011 7:23 AM