Is the Homestead tax credit a bad idea?
Edward L. Kennedy, a Perry Hall resident, qualifies for the Homestead tax break. That doesn't mean he likes it.
His credit for the condo he moved into three years ago is $85. His neighbors, who moved in several years earlier, is substantially larger. Thus his tax bill is nearly $800 more than theirs even though their condos have identical assessment values.
"Now if that’s not fair, I don’t know what is," said Kennedy, 83.
The Homestead credit caps the annual increase in owner-occupants' tax bills. That ceiling ranges across the state; in Baltimore County, where Kennedy lives, it's 4 percent. The idea behind it is to protect owner-occupants from huge one-year spikes in their bills, but it has the side effect of pushing more of the tax burden onto newer buyers.
"You're robbing Peter to pay Paul. I’m Peter,” Kennedy says.
As colleague Larry Carson pointed out in a story in 2005, the height of the housing boom, neighbors' tax bills can differ "sharply" under this system.
"Maryland attorneys general have issued opinions for decades arguing that the system is unconstitutional because it fails to treat all homeowners equally," he noted in the article. "No one has ever tested that theory with a lawsuit, however."
I suspect that's because (1) many homeowners don't fully understand how the system works, (2) most who do feel they benefit from it and (3) you're not likely to pay for the expense of a drawn-out lawsuit if the tax hit to you is several thousand dollars a year or less.
Enlighten me, folks: Are you in favor of the Homestead tax credit? Do you personally see much benefit from it?
How would you design a system if you wanted to avoid penalizing homeowners based on their length of ownership, but also wanted to ensure that no one ends up with a 20 percent annual jump in their taxes during a real estate boom/bubble (assuming of course that the lessons of the last one don't sink in)?
Most provocatively of all: Do you think a guy with a rowhouse he rents out to tenants should pay taxes on his full assessment every year if his owner-occupant neighbors don't?