The bigger government gets, the more burdensome it becomes, especially on taxpayers. The sum total of all taxes we pay today is overwhelming, especially for homeowners. Our politicians recognize that taxes are a burden on people’s shoulders, which is why they invent tax credits.These credits effectively serve as acknowledgements by politicians that they have stretched their confiscatory activities too far; they grant waivers from unbearable taxes to a select group of citizens. Baltimore has its own version of this pick-the-winners policy in the form of the “homestead credit” on property taxes. The credit caps the tax increase to four percent per year, but in order to qualify for the credit the property owner has to live in his property. This is good for the favored few, but as The Baltimore Sun reports, tax credits can go away as easily as they come:
Baltimore officials are asking the state to strip more than $1.3 million in property-tax credits they say were improperly granted to 2,157 homes, an early example of what city officials vow will be a continuing battle against tax-credit scofflaws. The city’s Finance Department also intends to collect up to seven years of back taxes, penalties and interest from the property owners unless they can prove they lived in the homes during those tax years. The city says those owners don’t occupy the homes, as the tax break requires. The properties are a mix of rental, empty and boarded-up homes. The effort is part of Mayor Stephanie Rawlings-Blake’s “billing integrity program,” which began in June when finance staffers requested that the state reverse tax-exempt statuses that shouldn’t have been applied to 17 properties. The city wants to collect nearly $1 million from the owners. … The homestead credit acts as a cap, preventing the amount of assessed value on which Baltimore homeowners are taxed on primary residences from rising more than 4 percent a year.
If the primary goal was to eliminate fraud from the property tax credit system, then the city would simply re-design the property tax so that it would be palatable to all property owners, without any credit tricks. But fraud elimination is not the primary purpose here. The city keeps the “homestead credit” because it allows them to maximize taxation on as many properties as they consider politically possible. Then, in order to increase further its revenues, the city transfers more of the burden of getting the credit to property owners, who have to go to greater length to prove that they actually live in their own homes.
There is, of course, a grim financial reality behind the tightening of the homestead credit. The city of Baltimore is suffering from chronic budget problems and is looking at every which way it can to raise more revenue. City politicians are willing to turn tax credit recipients into fraudsters until they have proven otherwise, just to get their hands on a few more dollars. The option – to shrink government and make it fit within what taxpayers can afford – is of course not within the realm of logical possibilities to spending-addicted politicians.
It remains to be seen how this property tax mess will affect the mayoral race in Baltimore. The incumbent mayor’s zest for more tax revenues is being challenged by opponents who all seem to have tax cut fever.