New excise tax is called a success

November 16, 2008|By JOSHUA BOWMAN

WASHINGTON COUNTY -- When the Washington County Commissioners recommended changes to the residential excise tax last year, they settled on a rate they said would keep revenues steady.

So far this fiscal year, the tax, which is charged on new home construction, has come close to meeting that goal.

In the first three months of fiscal 2009, which began July 1, the county collected $171,471 on permits taxed under the new $3-per-square-foot rate, according to county permit records.

Those same permits would have generated $198,291.16 if applicants were charged full price under the old tax structure.

"We knew it would be close," said Commissioners President John F. Barr, who noted the commissioners compromised on a rate of $3 per square foot because it was expected to generate roughly the same amount of tax revenue as the old flat rates of $13,000 for single-family houses and $15,500 for multi-family dwellings.


Overall, excise tax revenues still are well below budget because of the dismal housing market, as they have been for two years.

In the first three months of fiscal 2009, the county collected $312,208 in excise tax and related fees. That amount includes some permits taxed under the old rate structure.

The county's quarterly financial report shows that those collections were $536,858, or 62.8 percent, below budget projections.

The commissioners have said the goal of changing the tax this year was not to increase revenue, but to eliminate loopholes and increase fairness.

Under the old excise tax structure, homebuilders paid the same amount of tax on most single-family homes, whether they were 2,000 square feet or 4,000 square feet.

In addition, county officials complained that exemptions for elderly and work force housing were being abused by developers.

"The primary purpose was to sort of revise the tax to make it more efficient for everyone," Commissioner Kristin B. Aleshire said.

To that end, Washington County Permits and Inspections Director Daniel F. DiVito said the new tax has been a success.

"Absolutely," DiVito said. "People feel for the most part that $3 is reasonable."

Dennis W. Swope, vice president of Home Construction Corp., said the new tax gives a break to builders of smaller homes, which he said benefits his company and its customers.

Residential developers often pass on the cost of excise taxes to homebuyers.

On a typical three-bedroom, two-bath rancher, Swope said the new rate is about $5,000 less than the old rate.

"For us and our customers, it's a good thing," Swope said.

Swope said he has not applied for a new construction permit under the new rate but has paid excise tax on some remodeling work, which would have been free under the old tax structure.

"I don't agree with that. But you take the good with the bad," Swope said.

While the rate change has generated steady revenues overall, it has made a big difference in some tax bills, permit records show.

In one case, a permit issued in August that would have cost less than $1,300 under the old system was charged $3,840 under the new rate structure.

In another, a permit for a 2,766-square-foot house cost $8,298 under the new rate. That permit would have cost $13,000 under the old structure.

Mike Brown said the new tax structure saved him "a ton of money" on a house he is building on Gilardi Road in Boonsboro.

The Washington, D.C.-resident said a delay in blueprinting his house allowed him to avoid the $13,000 flat rate, which he said would have been disproportionately high on his 1,898 square-foot home.

"It would have been like paying D.C. taxes," Brown said.

Brian Jacques paid $13,530 in September for a permit to build a 4,510-square-foot home on his family farm in Smithsburg.

The tax bill was $530 more than Jacques would have paid to build a new home under the old tax structure.

Jacques said he likes the new tax structure despite the fact that it cost him more money.

"I think it's more fair than a flat rate," Jacques said.

He added, however, that any building tax is hard to swallow in the current economy.

"It gripes me that I even have to pay it, to be honest," Jacques said.

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