Raising the Income Tax
Originally Published: March 22, 2024
Approving Vote Ends Contentious Meeting
After spending the majority of the meeting discussing the Board of Education’s (BOE) budget request of $9.5M, the Commissioners decided in a 4-to-1 vote on Tuesday to provide $7M to the school system by raising the income tax rate to 3.2%. The increase provides an additional $7.6M in revenue for the county. Commissioner Hewitt was the only dissenter.
Commissioner Colvin began the BOE discussion by proposing the tax increase, and Commissioner Ostrow asked Dr. Smith, Superintendent, what would happen if the school system did not get their requested funds. $8.7M of the funding is for the negotiated agreement for teacher salaries, which will implement the Blueprint mandated $60K/yr starting salary. Without the money teachers will not receive a raise this year, even as County employees will get a 7% increase, Dr. Smith said, and next year the BOE will need an additional $16M to cover increased costs and the implementation of the salary requirements which must be in place by July 2026.
Three different funding suggestions were offered: Colvin supported $7M, Ostrow $5M, and Hewitt, whose number was the only one not generated by raising the income tax rate, said $2.5M. Dr. Smith addressed the impacts of those numbers. With $7M, 15-20 positions would be cut through the budget reconciliation process during April’s BOE meetings. At $5M or less, between 50-120 positions would be eliminated, and redistricting and closing any of 5 elementary schools with lower student counts, like White Marsh or Town Creek, could occur. Commissioner Hewitt pressed enrollment numbers, referencing data showing a decreased enrollment over several years. “There’s something going on with public education,” Hewitt said, “DEI is something parents are worried about.”
Commissioner Hewitt also wondered how to explain a tax increase to seniors who say they don’t have kids in the school system. But Colvin said income tax wouldn’t affect retirees. Hewitt pointed out that 3.2% is the maximum income tax rate allowed by the state, and he believed the BOE could still find funds within their budget. Commissioner President Guy said it was the Commissioner’s duty to “provide the best public services,” and he doesn’t mind paying a little more to educate the youth. “The state has let us down and the county has to pick up the pieces,” he said.
First Colvin motioned to raise the income tax, then Commissioner Alderson seconded saying he supported taking it to public hearing for input. If the public is against it, Hewitt asked, should the Commissioners rescind the decision? “If that’s the will of the people, then why not?” Alderson said. Commissioners Ostrow and Guy joined Colvin and Alderson in voting to raise the rate. Now, final balancing will occur and a recommended budget prepared and approved for the public forum where we will have a chance to weigh in. That public forum is April 23rd, 6:30PM, at Great Mills High School.
My Opinion—
Raising the income tax rate has been my predicted outcome since January when the Commissioners received a budget briefing from CFO Cudmore who said there was “flexibility in being able to raise taxes.” As the population grows and residents need expanded and additional services, the County must work to provide services as efficiently, and affordably, as possible. I agree with Commissioner President Guy–I don’t mind paying a little bit more to contribute to an excellent quality of life for St. Mary’s County. However, there is still opportunity within the county’s tax code to examine the impacts–positive and negative–of making changes.
Studying income and property tax rates over the last decade, a trend emerges. In 2014, an election year, the Commissioner Board (including T. Morgan) decided to lower the property tax rate for 2015. The incoming Commissioner Board (including Guy, Hewitt, and T. Morgan) benefitted from a lowered property tax rate. This Board again lowered the rate in 2017 before the 2018 election year. While the property tax rate has remained the same, $0.8478, the income tax rate was raised to 3.17% in 2020. The decision was made during the 2019 budget work sessions by the Commissioner Board (including Guy, Hewitt, Colvin and T. Morgan). Then, ahead of the 2022 election year, the Commissioner Board (including Guy, Hewitt, Colvin, and T. Mogan) lowered income tax to 3.10%. During 2022, the Commission Board (Guy, Hewitt, Colvin, and T. Morgan, who was then running for Delegate) voted to lower the income tax rate, this time to 3%. Final tax rate approval is included in the yearly budget approval each May, and those rates become effective January 1.
If the trend continues, raising income tax this year still provides the chance to lower it again ahead of the coming election in 2026.
Market studies about St. Mary’s County shows potential growth, including significant retail gaps which evidence disposable income possessed by residents. Leonardtown’s Downtown Strategic Plan from 2018 showed a combined trade area retail leakage of $350M, while Historic St. Mary’s City’s Market Assessment from 2023 showed a $112M retail leakage gap within a 30-minute drive time. Retail leakage is uncaptured market demand due to a lack of supply. When you see continued retail development, this is why–the businesses and developers see consumers with unspent money. Incidentally, the HSMC Market Assessment also states the “County has over 200 high-tech aerospace and defense companies, and more aerospace engineers per capita than any place in the country,” a statistic also highlighted by the County’s Department of Economic Development.
Commissioners have talked about the loss of $3M due to expanded property tax credits for veterans. They’ve said the state is doing them a disservice by calling the county “wealthy.” Commissioner Hewitt has said he doesn’t want to hurt seniors by raising taxes. Meanwhile, sports leagues are pressing for stable fees and turf fields; the community clamors for indoor recreation and meeting space; the County, Sheriff’s Office, and St. Mary’s County Public Schools all struggle with recruitment and retention of employees due to less than competitive pay rates; we have an undercounted homeless population with limited access to limited services. All of these things cost money. The persistent employment vacancies in the county government delay services to our residents, overwork existing employees, and are not proof of the ability to “tighten our belt” as Commissioner Hewitt has stated.
At Commissioner Ostrow’s February Town Hall, I suggested asking the Finance Dept to examine a graded income tax system. State law permits the County to implement an income tax rate between 2.25% and 3.2%. In doing so, the Commissioners may identify an opportunity to attain additional tax revenue while also easing the burden on those struggling the most. The tax strategy is already used elsewhere in the state. Setting specific tax brackets and corresponding rates based on income should be examined. There is room within the tax structure to make improvements, including with offered tax credits. For example, an existing property tax credit is available to seniors 65 years or older who have lived in their home for 40 years. We have a transient population because of the base, and seniors sometimes downsize and move as they age. The average length of homeownership in Maryland in 2022 was 15 years. What other potentially outdated tax regulations exist?
There are people who are struggling and there are also people who are doing very well. There is no doubt current revenues are not sufficient to provide necessary services and an excellent quality of life for residents. Moreover, we have some of the lowest tax rates in the state–and it shows. Next time you ask yourself why a building permit takes so long, why public infrastructure is inadequate, why police or EMS response times are longer, or why a baseball field is in disrepair, think about the cost of lowering taxes because it looks good for the next election.
Whatever your opinion, please show up on April 23rd, 6:30PM at Great Mills High School and provide your feedback to the Commissioners during the budget public forum.
