Does growth mean higher local taxes?

March 20, 2005|by Tom Firey

Many Washington County residents worry that the area's population and economic growth will lead to higher local taxes. After all, a growing population requires more schools, more teachers, more road capacity, more emergency workers and more sewer and water lines. Those public services mean increased government spending, and - it would seem - higher taxes.

The Herald-Mail's opinion pages have often presented this argument. A March 11 editorial cautioned, "As county residents are now seeing, an influx of new residents means increased costs for schools, roads and other services." A Jan. 6 editorial made the same point: "The more development there is, the more money government will need to deal with it." This belief extends beyond the newspaper's editorial board to many exasperated and angry writers of letters to the editor.

The commentators are correct when they claim that if local government wants to maintain its level of services per resident and the number of residents is rising, then government spending must also rise. But the population increase also means rising government revenue from newcomers paying local taxes - a point the commentators often forget.


For instance, the January editorial argued that the "cost for operating those schools (built to accommodate growth) ... will be spread among all taxpayers, whether they arrived here last week or 50 years ago." OK, but the cost of operating existing schools (plus the county's existing school debt, sewer debt and other expenditures) will likewise be spread over the people who "arrived here last week." If current tax rates assessed against a county of 140,000 cover the fixed and marginal costs of those residents' services, shouldn't the same rates assessed against 160,000 cover those residents' services?

In fact, for public education - the cost that people seem to fret about most - Washington County's economic and population expansion should be driving local taxes lower. Washington County Public Schools' enrollment at the beginning of the current school year was 20,310. From the fall of 1962 to the spring of 1977, WCPS had larger enrollments than it does now, with a peak of 22,215 students in 197172.

Over those 15 years, the ratio of public school enrollment to overall county population was much larger than it is today (.213 in 1970 compared to .145 in 2003), indicating that there were many fewer taxpayers per student then than there are now.

County real income per capita has increased roughly two-thirds from the 1960s-70s to now, which means today's taxpayers are considerably wealthier than their counterparts three to four decades ago. And county business property and real estate were less valuable then than they are now, indicating that the business and property tax base per public school student is much larger than in the past. Washington County has fewer students, more taxpayers, higher incomes and a more valuable tax base now than it did 35 years ago. So why would a taxpayer's burden for public education be heavier now than it was then?

What about other public services like sewer, water and roads? Sound public finance dictates that public utilities like sewer and water should be covered by customer fees, not general taxes. Road construction and maintenance should be covered by gas taxes, so that motorists will pay their own way based on how much they use the roads. If those principles are followed, then individual taxpayers would pay their fair share of various government services and the county's economic and population growth would not result in higher taxes to fund those services.

So why is the tax burden increasing? The driver is not growth, but changing policy choices. Local, state and federal education policymakers have made a series of decisions to reduce class sizes, enhance facilities, increase student use of technology and provide specialized instruction. Likewise, state and federal policymakers have redirected gas tax money to projects like public transit, resulting in diminished road funding. And county officials chose several years ago to finance much of the county sewer debt with general fund revenue because of the system's underutilization. Each of those decisions may well be worthwhile, but they come at a cost - and those costs push local taxes higher. Commentators who endorse preservation in order to keep taxes low would do better to scrutinize the tax effects of those policy changes, not growth.

Does this mean that Washington County should not pursue rural preservation? Of course not. As I've written previously, for aesthetic reasons I support many local preservationists' intended ends, even though I fervently disagree with the oft-proposed means of uncompensated downzoning. Many local preservationists have drawn on fears of growth-induced higher local taxes to gain support for those policies.

Given that those fears are a red herring, I hope the preservationists will argue for their desired policies using sound arguments grounded in legitimate aesthetic preferences. After all, true preservation must be supported by the public fisc, and the preservationists apparently are pretty ardent budget hawks.

Thomas A. Firey, a Washington County native, is a Cato Institute policy scholar and a senior fellow of The Maryland Public Policy Institute.

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