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DOCUMENTS


The Tentacle


July 16, 2012

Lost Revenue, Found Money, Lackadaisical Oversight

Jill King

The Baltimore Sun recently detailed information which prompted an audit of Baltimore City tax credits, with numerous layers of governmental agencies involved. The State of Maryland handles its historic property tax credits through the State Departments of Assessments and Taxation (SDAT).

 

There are 1,200 properties in Baltimore which currently meet this status; The Sun found seven errors, costing the city $2 million in city tax revenue.

 

A few decades ago, in the late 1970s, the state took over the assessment and taxation duties; this in turn gave the state responsibility for regulatory measures and to pick the winners and losers, who get credits and who doesn’t. What they accomplished was a system, governed by the state, which has little communication with the city and county taxing authorities.

 

The Baltimore City case is unique in the fact that they are one of the only cities or counties which requires the state to do its historic tax credits; those in most counties and cities accomplish their own – in house.

 

Some of the properties in Baltimore are structures only and ground rent is paid to the city for external land use; they subsequently have been moving away from this in order to attract buyers.

 

Although they work hand-in-hand, many of these agencies don't talk, as they are separate functions conjoined only by the same desire – taxation. Even if it is a local credit, the Department of Assessments and Taxation handles the paperwork; a crew in Baltimore verifies the claims.

 

There are several other credits that the state will provide, including the homeowners property tax credit. This credit affects the state, county, and local taxes that property owners pay. The renters' tax credit appeals to low income renters and is applied to the owner’s taxation, once the owner has paid the full amount.

 

In order to receive a credit, there is a formula set by the state for these credits based on income v. taxes; all you have to do is meet all of the other criteria, some of which includes living in the property and the net worth of the applicant, not including the property.

 

The requirements are easily skirted, costing the rest of taxpayers more.

 

Each jurisdiction has its own office that deals with these tax credits, but ultimately the data is filled in, with assistance, or by the applicant at home and sent to the state office in Baltimore for processing.

 

"Too many cooks spoil the broth" is the perfect proverb for this action; the state has recognized over the past few decades that this is a revenue enhancement or a job creator. The selfishness and need for control only proves that there is something bound to go wrong; and now it is slowly starting to be revealed.

 

When the state took this over, it constructed the regulating guidelines offices; yet many of these rules have not changed since they were developed originally.

 

A person seeking employment as a clerk is only required to have an 8th grade education, yet they were aiding in filling out documents that the state is responsible for overseeing; in most counties this is not true, but there had to be a reason to pick such a low educational standard.

 

The problem in Baltimore is that of a total market value of the entire home was figured, used in the homeowners’ property tax credit process instead of that of improvements. This error was blamed on a spreadsheet interaction enacted three years ago, between the City of Baltimore and the State of Maryland, according to The Baltimore Sun.

 

Although, Mayor Stephanie Rawlings-Blake refused to provide a statement, recent reports show that she and the former mayor have been losing the revenue battle for a while now. Baltimore is not only losing population, but it has now been proven to be losing revenue, thus depending on the rest of the state to pick up the tab.

 

The finance department is taking the blame; but there is a larger story here that can easily be construed as negligence by the state.

 

Annapolis lawmakers will now keep their eyes open and probably solve this in the same manner, creating jobs, instead of fixing the system or giving it back to the counties to regulate. Accountability on a lower scale is always a better option and easier to diagnose and repair.

 

The system can have a large number of problems, as we have noticed in the crusade of Election Integrity Maryland, where deceased people could be receiving credits. Maryland created a direction in which to clean the voter rolls and defined the measures for removing deceased people; but it is clearly not overseeing whether this is accomplished.

 

This should be an example for all; accept responsibility for your actions and be careful not to take on so much responsibility that one cannot oversee or manage it properly.

 

When it comes to doing business with Frederick County, the Board of County Commissioners has gained a reputation of holding accountable the directors and boards of those seeking county funds if they receive taxpayers’ money. They hold their "feet to the fire" more often than not and seek to oversee a system prudently.

 

When coupled with the state, the larger entity is responsible for the flaws that touch our local tax-revenue receipts. This, in turn, could create "found" money and a lower tax rate.

 

With that said, the best way to fix this is to give it back to the counties, decreasing the state liability for actions presented to municipalities, counties, and taxpayers. This would decrease the state responsibility to OPEB (Other Post Employment Benefits) and other benefits and put them on a county system; it would allow each jurisdiction to be responsible for its own oversight and increase the needed local communications.

 

This is only the beginning of the Assessments and Taxation audits. Expect to see more when counties begin their own investigations.

 

Retraining my brain for the future, conferring with my past...

 

retrainbrain@hotmail.com

 



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