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Housing slump gives county chance to get excise tax right

February 18, 2007|by TIM ROWLAND

As a mechanism for funding new construction, the excise tax in an imperfect vehicle. But at the moment it's the only car in the garage, which is why the Washington County Commissioners' plan to improve its horsepower makes sense.

And by improve its horsepower, I mean basing it on a sliding scale (the bigger the home the higher the tax) and lifting caps to bring in more revenue.

As a subplot, the excise tax is a fine example of why home rule with some degree of taxing authority is, or isn't, a good idea.

The excise tax in Washington County has had more fits and starts than the Gemini space program, largely because of the cumbersome process of having to seek approval for every little word change in Annapolis.

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Commissioners and lawmakers have a long history of speaking two different languages, and their goals are not always the same. Even basic communication is routinely an issue, as evidenced by the fact that this week that lawmakers couldn't discuss the tax revisions because the county hadn't provided a timely e-mail copy of the proposal.

When dealing with a local emergency such as basic classroom space, it would be nice if local elected officials could more efficiently control their own destiny.

On the other side, the delegation does act as a check and balance over any local initiative that may tend to get carried away - as some no doubt feel is the case with the excise tax in general.

The excise tax operates under the guise of a users fee, although it isn't. As a primary funding stream for new schools, it holds new homebuyers accountable for extra classroom-space needs.

But obviously, new homebuyers may be financially penalized even if they have no children. Meanwhile, a couple with seven children may move into the county and rent an apartment built prior to the excise tax and get a free ride.

In regard to the sliding scale, the tax similarly supposes that the bigger the house the larger the family. But a lot of these big new houses have rooms that don't even have any furniture, much less kids.

Instead, the sliding scale basically acts on the homebuyer's ability to pay, children or no. If you can afford a large home, you can afford to contribute a larger share - a theory that is not necessarily bad, and is the backbone behind the progressive income-tax structure.

And in a county concerned about affordable housing, a flat, $13,000 tax on all new homes is particularly discouraging to low-end homebuyers. It's conceivable that close to 10 percent of your new-home cost would go straight to the government, without buying so much as a two-by-four.

But the excise tax, as written, hasn't lived up to its potential. Commissioners say it's $11 million below estimates, largely because of the housing slowdown, but also because of the way the tax is structured.

Yes, it's hard to get weepy over a shortfall in a tax that didn't even exist five years ago. And this shortfall should not be interpreted as a starvation for cash, as evidenced by the county's ever burgeoning budgets (remember reassessments, anyone?).

But the real paradox of the excise tax is this: With schools packed to the gills, the county had been somewhat reluctant to approve big new housing developments. But without big new housing developments, there will not be enough money to expand the schools.

That may be a bind that suits some, particularly those concerned with subdivisions gnawing away at the rural landscape.

But even without any new homes, schools are already in crisis mode, with portable classrooms littered around schools like piglets around a sow.

Prior to our growth spurt, school enrollment was 19,670. Today it's 21,339 and in five years it's expected to be close to 24,000. And the county now has a total of 82 temporary classrooms.

The housing slump has been painful for builders, sellers and Realtors and the local economy as a whole, but if there is a bright side it is that it provides a narrow window to restructure the excise tax - and get it right this time, which would include making it permanent. To their credit, local lawmakers seem willing to listen and - this is crucial - act upon it this year.

There are signs the slump has hit bottom, and may begin to rebound by summer. These predictions are habitually premature, but the wheels of government are habitually slow. Bills passed in the winter generally don't take effect until July, so if lawmakers don't act before next session, no increase in school-construction money will be realized until the summer of 2008.

If there is in fact a housing resurgence next spring, schools could miss out on a substantial pot of potential construction funds.

Historically, Washington County has waited for a crisis to act. And then when it does act, or try to, squabbles and miscalculations pour tap water into the fuel system. In school construction, we are holding true to form. But the housing slowdown has given the county a bit of a mulligan.

Events are waiting on the county and state to get their acts together, and they should take advantage.

Now if only the commissioners could remember to hit the "send" button on their e-mail a bit earlier.

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