The notorious Willie Sutton said he robbed banks because "that's where the money is."
The Governor's Commission of State Taxes and Tax Structure -- or the Linowes Commission, named after its chairman R. Robert Linowes -- is visiting Montgomery County next week for much the same reason. It's holding a public hearing on ways to "redistribute resources" from places like Montgomery and Howard counties to places like Baltimore City and a handful of rural counties. "Redistribute resources." Willie Sutton couldn't have said it better.
Appointed two years ago by Gov. William Donald Schaefer, the commission is zeroing in on recommendations that, if enacted, will change the lives of millions of Marylanders. Who will be the winners and losers? No one knows yet because the commission's final report isn't due until December, after the governor and legislature are safe from the voters. But based on its interim report and staff studies, the Linowes Commission appears to be well on its way to igniting a war between local jurisdictions, a war that no one will win.
Every year Marylanders pay a state income tax. At the same time, they also pay a local income tax nicknamed the "piggyback tax," because it's collected on the state income tax form. Louis Goldstein, the state comptroller, keeps the state's portion and sends the local money back to each county, where it's used to repair roads, pay teachers or whatever.
How important is the piggyback tax? It raises more than $1 billion annually for the state's 24 local governments, accounts for 21 percent of their revenues and lessens local governments' reliance on the regressive property tax, one of the main reasons it was created back in 1967.
Like the property tax, the piggyback tax is a local levy. Each county keeps what it raises. So a wealthy county like Montgomery can raise $806 per capita while less wealthy Baltimore City raises only $394. This difference is more than offset by federal and state aid programs to the poorer jurisdictions. For example, Baltimore City gets back $1.81 in state aid for every tax dollar it sends to Annapolis, while Montgomery gets back 40 cents.
The Linowes Commission is turning this system upside-down. Instead of helping poor counties by increasing federal and state aid, it wants to rob rich counties. Under one staff proposal, Baltimore City and several rural counties pick up $108 million annually by taking some of Montgomery County's piggyback tax revenues.
How does the commission justify raiding the local piggyback tax? Easy, by simply denying it's a local tax. By pretending, instead, that it's a state aid program open to legislative tampering. Besides, the piggyback tax is "where the money is."
It's outrageous. Piggyback taxes belong to the counties in which they're raised. That's the opinion of Harry Hughes, chairman of the 1967 commission that created the piggyback tax. And that's the opinion of Louis Goldstein, the state's chief tax collector since 1958. It's also the opinion contained in every state report during the past 23 years.
But the Linowes Commission is only interested in finding more money, even if it means getting piggy about the piggyback tax.
And it doesn't stop there. The commission is studying a tax on commuters who live in one county and work in another. And it wants to increase education funds for some school children by reducing education funds of others.
This county-vs.-county approach is a formula for disaster, pitting rich against poor, cities against suburbs and employment centers against bedroom communities. Worst of all, it fails to realize that counties aren't rich or poor, people are.
When the state cuts a county's local revenues or state aid levels, two things happen. The county makes up the loss by either increasing property taxes or by cutting programs.
Both are wrong. The property tax is already too regressive, and it's overused. And the budget cuts almost always fall on those who can least afford them. "The last time we did this, the people with the weakest lobby got hurt the most -- infants, poor women, children," says Chuck Short, chief of Montgomery County's Family Service Department.
The best way to help Maryland's poor is by taxing individuals, not counties. Maryland suffers from one of the most regressive income tax systems in the nation. All Marylanders, in effect, pay a flat 5 percent rate. By adding additional tax brackets, the state could reform its tax structure and raise the money it needs to save Baltimore at the same time.
The new taxes would still come from the wealthy counties (Montgomery County with 16 percent of the state population generates 25 percent of the state's income tax and files 42 percent of the tax returns over $100,000). But the money would be coming from taxpayers on an ability-to-pay basis, not from the county's budget revenues.
If the Linowes Commission is really interested in the most fair and most rational approach to "redistributing resources," it should abandon its attack on some counties and propose a more progressively graduated income tax. -- Blair Lee is vice president of a Silver Spring development firm.