Prince George's County may have grabbed a tiger by the tail in pushing for an increase in the tax that business pays on equipment.
The tax may be one of the few options left for County Executive Parris Glendening and members of the council to avoid a huge budget shortfall that has been projected for the next fiscal year. But the council's preliminary approval Tuesday of a bill that would increase the so-called business personal property tax may be a case of unfortunately bad timing.
Already, a small but vociferous group of corporate executives in Maryland is telling the world that the state maintains an adversarial relationship with business. With the business community in Prince George's County denouncing the personal property tax as discriminatory, the job of disproving that claim may become more difficult for state and county officials.
If the measure passes, Prince George's County would be the first Maryland jurisdiction to impose separate tax rates on real and personal business property. Besides being discriminatory, the Prince George's County Chamber of Commerce contends, the tax increase would set a bad precedent for the county and possibly for the state.
Glendening counters criticism of the proposal with the observation that Prince George's would still have one of the lowest combined tax rates among area jurisdictions.
A tax study by the Greater Washington Board of Trade tends to support Glendening's argument. The board's Comparative Tax Report for 1982-1983 shows that hypothetical companies in various business categories are likely to pay lower total state and county taxes in Prince George's County than in any of the other major local jurisdictions.
The personal property tax that the county wants to decouple from the real estate tax would increase from $2.63 per $100 of assessed valuation to $3.57--the level that was in effect before passage of the TRIM amendment four years ago.
Voters in Prince George's County approved TRIM in 1978, capping real property taxes. In the intervening years, the real property tax rate has declined while real estate values have increased.
Authors of the TRIM legislation erred in not separating personal and real property taxes, and as a result, say county officials, personal property taxes have also declined. "We don't believe it was the intention of the people in the county to give business a tax break," declared an aide to Glendening.
That's pretty heady stuff for a county that last year gave a controversial three-year tax break to the Washington Capitals National Hockey League team, which plays at the Capital Centre in Landover.
In any event, Prince George's County officials deny that the latest tax proposal represents an increase. It is, they explain, a means by which the county can correct a mistake and restore the personal property tax rate to the pre-TRIM level.
Despite having the benefit of what amounts to a tax break for four years, business complains that it is being singled out. Moreover, chamber officials say the county is singling out a special business segment. In that sense the chamber supports the contention by utilities that they will bear the brunt of a tax increase.
Utilities as a group would pay the biggest percentage of the total tax take because they require a massive amount of equipment to provide service to the county's 665,000 residents. Rather than absorbing the higher tax on equipment, utilities say they will pass it on to consumers, a move that county officials have vowed to fight in court, if necessary.
Meanwhile, Robert Zinsmeister, the chamber's director of governmental affairs, warns that the proposal will "send out a bad message to the business community."
Even though Zinsmeister doubts the proposal will result in "a significant change in total taxes" paid by business, he argues that by proposing an "onerous" tax, the county apparently is "overlooking the kind of impact this is having."
That kind of talk can't do Prince George's much good, especially when it is having difficulty persuading doubters in metropolitan Washington that investing in the county is no more a risk than it is elsewhere.
In the meantime, the bad message coming out of Prince George's County is that business reaped the benefits of a dubious piece of legislation and now threatens to take out its anger on consumers when asked to pay its fair share.