In a regrettable column in this week’s Gazette, Barry Rascovar says:
Pity Maryland’s home owners. They’ve been targeted, unwittingly, by state legislators.
Mr. Rascovar is talking about the new law that requires homeowners to complete a one-time application to verify their eligibility for the homestead tax credit. As a result of some amount of public pressure, the Maryland Legislature is considering a bill which would repeal the new requirement. Now, for the most part the arguments I’ve seen in favor of repeal go more or less like this one from Mr. Rascovar:
Many home owners don’t even know property tax caps exist. They ignore notices stuffed into their reassessment notices that arrive once every three years. Chances are tens of thousands of home owners will fail to apply for inclusion in the Homestead Tax Credit.
Only when their tax bills soar will they discover they’ve been caught in a massive snare created by state lawmakers. Then the howls of enraged protests will be heard. It could get ugly.
In other words, the poor, ignorant taxpayers of Maryland will never know what happened; they’ll just be hit all of a sudden with a huge bill — victims of a greedy legislature, tricked into fattening the State’s coffers. Never mind the fact these homeowners will be able to get their bills corrected after the proper paperwork is filed. But in this column, Mr. Rascovar goes further, making it clearer what this is all about:
Just why someone who happens to live part-time in Maryland or owns a vacation home in Ocean City or Deep Creek Lake should be discriminated against and forced to pay much higher property taxes hasn’t been made clear. Nor is there a strong case for squeezing more tax revenue out of owners of rental property (who will simply raise the rents they charge).
See? In reality, Mr. Rascovar just doesn’t like the fact that people who own multiple homes, and people who own rental properties, can only get the tax break on the one property they happen to live in most of the time. But the Homestead Tax Credit was specifically tailored to encourage home ownership in the sense of owner-occupied housing, and is not available for these other sorts of properties. I do not imagine that there is any will in the legislature to change this aspect of the tax code. So barring any such change, Mr. Rascovar would appear to think that anyone who doesn’t like paying their full, legal tax obligation should just be able to lie about where they live and claim that they have multiple principal residences.
Mr. Rascovar also raises the specter of people’s rents going up as a result of this law. But the simple fact is that anyone who is renting from a law-abiding property owner is already paying whatever rate would result from such a pass-through. It is, for example, extremely unlikely — if not impossible — that any muti-family apartment building is getting this tax break. Generally the rental properties at issue are single-family homes (although likely including condos and townhouses). And in many cases these are the homes that have been turned into overcrowded, unlicensed boarding houses. Sometimes they are the vacation homes that are rented on a weekly basis while the owners are not there. These are not the sorts of investment activities that the Homestead Tax Credit was meant to encourage.
Yes, sometimes these homes are just ones that people kept as rental properties when they moved to a different house; in a large number of these cases I do imagine that these homeowners were ignorant of the requirement to change the principal-resident status of those properties, and this new law will be an awakening that will shave the margins between rents and costs. But ignorance of the law has never been an excuse for breaking the law, and this is a change that is overdue. Moreover, Mr. Rascovar does not present evidence that owners of such properties have been systematically charging sub-market rates for these properties as a result of the illicit tax breaks, thus passing the savings through to their renters. And in some cases the homeowners have extended their “ignorance” to two, three or even more rental properties.
Still, Mr. Rascovar wades yet further into the deep end:
Bureaucrats claim that owners of vacation homes and rental properties are “tax cheats.” Since when? Why are these Marylanders considered outlaws? When did it become evil to buy a second home or become a landlord? Why this double standard?
Oh, please. No one is claiming that the simple ownership of a vacation home or rental property makes anyone a “tax cheat”. It is only when the owners of these properties lie to the tax authority about their use of those properties that they become tax cheats. There is no double standard at play. Don’t be bamboozled by Mr. Rascovar — contact your representatives and let them know that House Bill 1256 is bad legislation, and should never see the light of day.
