The Frederick County Council on Tuesday will be voting on whether to adopt a new property tax rate “constant rate” or reduce the property tax rate to receive the same amount of revenue from the property tax as last year “constant yield.” I will be voting to reduce the property tax rate on households this year to put more money in the pockets of families, the majority of which have taken an economic hit as a result of the response to the COVID-19 pandemic.
What makes this “constant rate” a tax increase is that properties are re-assessed every three years, and generally in a county like Frederick, they increase in value. If the same tax rate is applied to a property that has increased by 50 percent, then the property taxes that a citizen will pay on that property will also increase by 50 percent. Unlike the income tax, (which also remains constant but people pay more actual dollars as their income increases) there is not necessarily a corresponding increase in the property owner’s household budget, simply because their home value increased on paper. This means that the amount of total dollars that a household must pay toward property tax generally increases every year unless the County Council acts to adjust the property rate downward.
The County Council has received numerous communications on this front, many of which are strikingly alarmist, saying that reducing the property tax rate to maintain the same amount of revenue as the prior year is equivalent to “starving the county of funds.” The facts tell a different story. This year, maintaining the constant yield and lowering the tax rate would reduce potential revenue by $8.5 million in the $665 million proposed budget. This would not necessitate any actual cuts in the county budget. The county budget this year is set to increase by about $28 million. So even adopting the constant yield this year, allowing families the economic certainty in these difficult times of not having to pay more of their household budget toward taxes, would still afford the county about a $20 million budget increase.
Cutting the property tax rate is a reasonable proposal that would help real households in Frederick County, and is needed more than ever. I opposed the constant rate last year, also asking for a county property tax decrease (when it accounted for less than $4 million of the $34 million increase in the budget). Last year the argument against this was that economic times were good and we needed to take advantage of the good times to take care of priorities in anticipation of leaner times.
This year, we are unfortunately entering lean times. The unemployment rate is around 15 percent at the time of writing and many more people are facing a reduction in household income. Business as usual of keeping the tax rate constant with increased home values causing a higher tax burden is not acceptable during these times. We must act to help struggling households. We have the financial ability at the county level to provide predictability in tax bills by lowering the tax rate in these uncertain times and the County Council should act to do so.
Phil Dacey is a member of the Frederick County Council.