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'Differential' might bring fairness to county taxes

October 13, 2009|By HEATHER KEELS

WASHINGTON COUNTY -- County officials are looking into a new way to address double taxation of municipal residents that they say could be more fair and more direct than the current system.

Under the proposed "tax differential" system, residents of municipalities would pay a lower county tax rate than residents of unincorporated areas to reflect the different level of services the county provides the two groups.

For example, city and town residents would not have to pay for Sheriff's Department patrol services because most municipalities in the county have their own police departments, County Administrator Gregory B. Murray said.

The county currently addresses this issue by providing municipalities with tax rebates, or checks made out directly to the city or town, to cover the taxes that municipal residents paid the county for duplicate services, County Budget and Finance Director Debra S. Murray said.

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However, this tax rebate system, set up in the 1980s, has become antiquated, and it does not truly address double taxation directly to citizens, Debra Murray said.

The proposed tax differential system would be modeled after one that has been implemented successfully in Anne Arundel County, Debra Murray said.

It would work by breaking county services into two groups: those that serve the entire county, such as schools, libraries, and the Washington County Detention Center, and those that are duplicated within municipalities, such as roads, parks and police patrol services, and therefore should be funded only by taxpayers in the county's unincorporated areas, Gregory Murray said.

In order to bring in the same amount of revenue that would have been recovered if the county provided a tax rebate, municipalites would need to raise their tax rates, Gregory Murray said.

Depending on how much the municipalities raise their rates, residents there could end up paying the same total amount of taxes, he said.

However, the switch to a tax differential could increase the proportion of those taxes that ends up with the municipalty versus the county.

"The existing agreement only takes into consideration a few services, so (municipalities) don't get as much as they would under the new method," Gregory Murray said.

The switch to a tax differential system could result in a net revenue loss for the county of $400,000 to $600,000 a year, Debra Murray said.

The Washington County Commissioners reached a consensus to continue looking into switching to a tax differential system, but Commissioner Kristin B. Aleshire said he was concerned that categorizing services such as libraries as countywide would discourage municipalities from making voluntary contributions to those services.

Aleshire also suggested spreading out the switch over two years, with a hybrid system for fiscal year 2012 and the full differential system in fiscal year 2013, to spread out the impact. He said he wanted to hear feedback from municipalities on the proposal and whether they would prefer a complete or gradual switch.

Double taxation has been a simmering issue in Hagerstown, where elected officials have long pushed for a fairer system.

Asked on Tuesday about the county's idea, Mayor Robert E. Bruchey II said he hasn't seen any numbers or heard from the commissioners, so he hasn't formed an opinion yet.

However, if the county simply shifts the same amount of money from the tax rebate into the new tax differential, "I don't see that as a win," he said.

Bruchey said the city would have to raise taxes to cover the difference, which he's against.

He said he favors the county reimbursing the city in several areas, beyond just police, parks and roads.

Staff writer Andrew Schotz contributed to this story

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