Home > Policy Topics > Budget and Tax > “Renew Baltimore” Slash-and-Cap Tax Proposal Would Make Baltimore a Much Worse Place to Live, Work, and Do Business

“Renew Baltimore” Slash-and-Cap Tax Proposal Would Make Baltimore a Much Worse Place to Live, Work, and Do Business

By Christopher Meyer and Musaab Ibrahim

A proposal to drastically cut and permanently cap Baltimore City’s property tax rate is again on the table, after failing to gather enough signatures to reach the ballot in 2022. The proposal would put Baltimore on a dangerous path, forcing massive cuts to fire protection, violence reduction efforts, sanitation, school nurses, and other vital services. An analysis by the city’s nonpartisan Bureau of the Budget and Management Research (BBMR) concluded that proponents’ claims are “wildly optimistic” and that service cuts forced by the proposal could drive more residents out of Baltimore.[i] Their findings are in line with MDCEP’s analysis of the failed 2022 proposal.[ii]

Property taxes are the most important self-generated revenue source for Baltimore City. Property taxes are projected to total $1.14 billion in FY 2025, nearly half the city’s general fund.[iii] This revenue is the lifeblood of public schools, roads, public health, parks, and other investments Baltimoreans rely on. Property taxes make this city run.

The so-called “Renew Baltimore” ballot initiative would reduce the city’s property tax rate from 2.248% to a maximum of 1.200%, phased in over seven years. Because the proposal operates through the city charter, it would tie policymakers’ hands, generally prohibiting tax increases over the cap regardless of budget needs.

The proposal would cost more than $600 million per year in lost revenue once fully phased in, according to nonpartisan city analysts – a 23% drop in general fund revenue compared to current expectations.[iv] Baltimore already faces fiscal challenges, and slashing property taxes would make these much worse. The proposal would likely more than double the city’s general fund budget deficit within two years, and more than quadruple the deficit once fully phased in.

Deep Tax Cuts Mean Deep Service Cuts

Like most local governments, Baltimore City is required to balance its operating budget each year. This means slashing property taxes would leave policymakers with no choice but to cut deeply into services. Furthermore, because some major costs are driven by state law (public school funding) or existing financial commitments (retirement contributions), policymakers can meaningfully reduce only certain parts of the budget – which means even deeper cuts in those areas.

The BBMR analysis mapped out the kinds of cuts the proposal would cause.[v] Here are a few of them:

Public Safety:

  • Cut Fire Department front-line units by 40%[vi]
    • Lay off about 400 firefighters
    • Lay off about 125 EMS workers
    • Likely close multiple fire stations
  • Eliminate victim and witness protection programs
  • Eliminate all 10 Safe Streets violence prevention sites
  • Eliminate school crossing guards

Sanitation:

  • Eliminate street and alley cleaning
  • Return to permanent bi-weekly recycling collection

Health:

  • Reduce school nurses to only one for every three schools
  • Eliminate all pre- and post-natal maternal health visits
  • Eliminate Healthy Homes lead exposure visits

Youth:

  • Eliminate all after-school programming
  • Reduce recreation center hours from six days a week to three
  • Eliminate 2,000 Youth Works jobs slots

Arts and Culture:

  • Close seven out of 21 neighborhood libraries
  • Close Cylburn Arboretum and Rawlings Conservatory
  • Eliminate all grants for art and cultural institutions

 

Greatest Harms Likely to Fall on Low-Income and Black Baltimoreans

The proposal is part of a long history of tax limitation measures enacted specifically to protect white power at the cost of multiracial democracy. In fact, the nation’s first constitutional property tax limit was the work of white politicians in Alabama working to unwind Reconstruction reforms.[vii] Forcing deep service cuts will mean Baltimore’s lowest-income residents, who rely on the essential services mentioned, will be hit the hardest. The plan would exacerbate racial injustice as a majority of Baltimore’s low-income residents are Black and people of color.

By undermining these services, the city would be on a path of harming and reducing the advancements racial justice advocacy has achieved in Baltimore City.  One example would be that low-income homeowners would likely lose access to targeted tax credits, making homeownership more difficult for those who have endured the racist history of redlining. Additionally, the plan’s impact on public school services such as after-school programming and reduction of recreational centers acutely impacts Black Baltimoreans.

Furthermore, the plan’s false promise of meteoric population and property value growth discounts the severe displacement of the city’s low-to-moderate income families who will be faced with a choice to either endure inadequate services or leave the city. The plan claims to be focused on achieving racial equity for the city residents but disregards the impact to services that are essential for Black Baltimoreans and other Baltimore residents of color. This is not how to achieve equity and inclusion.

Proponents’ Promises Are Fantastical

The plan’s backers claim that slashing property taxes will deliver miracles for Baltimore’s economy. But their arguments fall apart under the slightest scrutiny:

  • We have seen this story before. The 2012 Kansas tax cuts provide a crystal-clear test of tax-cutters’ lofty promises.[viii] Led by Republican governor Sam Brownback, lawmakers slashed income and business taxes and promised an economic boom. Instead, the state’s economic growth lagged the nation and neighboring states in the following years. Revenue losses forced policymakers to significantly cut funding for health services and public schools, and credit agencies downgraded the state’s bond rating. A bipartisan supermajority in the legislature rolled back the tax cuts in 2017 to stop the bleeding, overriding Brownback’s veto.
  • Making up lost revenue would require meteoric growth. City analysts conducted a simulation to test proponents’ claim that the tax cuts would pay for themselves through faster growth.[ix] They found that the city would have to gain 325,000 residents and more than 8,000 new businesses to make up for the lost revenue – a 57% population increase in just seven years. In the last 25 years, only 1% of counties nationwide have experienced growth spurts this rapid.[x] None have done so from an initial population exceeding 500,000.
  • Local property tax caps consistently lead to service cuts. For example, in the five years after New York State policymakers enacted a local tax cap in 2011, counties subject to the cap cut inflation-adjusted expenditures by amounts ranging from 5% (education) to 25% (community services).[xi] Local governments shed 29,000 jobs during this period, even as the private labor market recovered from the Great Recession.[xii] Because the New York cap did not mandate a steep reduction to the tax rate, these cuts significantly understate the likely consequences in Baltimore.
  • Tax cuts would not make Baltimore meaningfully more affordable for residents. A family with a $250,000 home might see its monthly mortgage payment decline by about 10%,[xiii] not nearly enough to attract hundreds of thousands of people into the city. If property values increased – one factor proponents claim would soften the plan’s revenue impact – families’ housing costs could actually go up.
  • Tax cuts would not make Baltimore meaningfully more affordable for businesses. Nationwide, local property taxes account for only about 0.9% of businesses’ total costs.[xiv] Based on this figure, the proposal would lower the cost of doing business in Baltimore by about 0.4%. Even if property taxes are a larger share of business costs in Baltimore City than nationwide, the tax cut would have little impact on businesses’ bottom line.
  • New residents need city services, too. If Baltimore suddenly gained 325,000 new residents (a 57% increase), the city budget would have to grow, too. More residents mean more children in school, more tires wearing down roads, more trash and recycling to collect and process, and so on. Ultimately, even wildly unrealistic growth would not make these tax cuts affordable.
  • The plan may not even deliver on promised tax cuts. City analysts predict that slashing the official property tax rate would put existing broad-based tax breaks on the chopping block, such as the Targeted Homeowners Tax Credit claimed by 73,500 Baltimore homeowners. Furthermore, state law defines minimum local contributions to public schools, and allows counties to exceed tax caps to meet those obligations. Even with deep, harmful service cuts, the city will still likely need a higher tax rate to comply with state law.
  • Service cuts would hold back economic growth. If the proposal passes, residents can expect longer emergency response times, dirtier streets, more violence, worse customer service, sicker children, and fewer cultural attractions. Not only will service cuts hurt current residents, they will make the city a less attractive place to live and do business, stunting economic growth. Furthermore, large-scale layoffs will depress sales at local businesses. Baltimore City employees who also live in the city take home about $400 million per year altogether[xv] – an important contribution to the local economy.
  • Maryland business groups have warned against rigid tax caps. In 2018, the pro-business Greater Salisbury Committee called for relaxing or sunsetting Wicomico County’s property tax revenue cap.[xvi] The group highlighted the cap as hindering infrastructure, retention of young professionals, disaster readiness, and other building blocks of a strong economy.

 

In Context: Baltimore City Taxes Are in Line with Other Maryland Jurisdictions

The plan’s proponents frequently point to Baltimore City’s official property tax rate of 2.248%, which is indeed the highest in the state. However, this simplistic comparison falls short for several reasons:[xvii]

  • Most Maryland counties include one or more municipalities that levy additional property taxes on top of the county rate. One in four Maryland residents lives in a municipality, meaning that they pay more in property taxes than the county tax rate suggests.
  • Baltimore’s Targeted Homeowners Tax Credit lowers the effective property tax rate for homeowners by an average of 0.2% of assessed value, equivalent to a roughly 9% lower tax bill. Baltimore City is the only Maryland jurisdiction with this type of tax break.
  • Unlike most large Maryland counties, Baltimore City funds solid waste services like trash and recycling collection out of taxes. Other major counties instead charge a fee, which isn’t reflected in the property tax rate and falls more heavily on low-income residents.

One way to more accurately assess the variation in tax responsibilities is to compare total county and municipal taxes, per capita and as a share of residents’ income. This approach captures how much residents actually pay and how taxes compare to residents’ ability to pay, giving a more relevant picture than official tax rates. By either measure, Baltimore City’s taxes are unremarkable (FY 2022):[xviii]

  • Baltimore City taxes (property, income, and other) totaled $3,288 per capita in FY 2022, practically equal to the statewide average of $3,252. Seven other counties had higher taxes per capita. Together, these counties are home to 1.7 million Marylanders, or 27% of the state population. Looking at property taxes alone, five counties rank higher than Baltimore City.
  • Baltimore City taxes add up to 5.6% of residents’ income, the third-highest share statewide. Worcester (7.8%) and Garrett (6.4%) counties have higher taxes by this measure. Three more counties have total effective tax rates over 5.0%, and altogether more than 2 million Marylanders (33% of the state) live in an over-5.0% county. Looking at property taxes alone, three counties rank higher than Baltimore City.

 

Real Solutions

There are better ways to make Baltimore City more affordable and more vibrant. These steps will do more to strengthen our city than massive tax cuts, and won’t be possible if the proposed tax cuts become law:

  • Strengthen protections for low-income homeowners. Baltimore already spends more than $100 million per year on property tax credits, but most of these are not well targeted to the families with the greatest needs. We should expand the Supplemental Homeowners Tax Credit, which targets assistance to homeowners who live on low incomes.[xix]
  • Create a renter’s tax credit. Renters are more likely to be people of color, typically have lower income, and are more likely to face unaffordable housing costs than homeowners. A local renter’s tax credit would offset property taxes passed through by landlords. This may require state authorizing legislation.
  • Tax vacant properties. Lawmakers in the 2024 General Assembly passed House Bill 2, authorizing Baltimore City and other counties to levy a special tax rate on vacant and abandoned properties.[xx] Levying an additional tax on these properties would shore up the city’s finances without increasing residents’ tax responsibilities, and could boost the tax base by incentivizing rehabilitation of vacant properties. Assuming an average property value of $15,000 and a 10% tax rate (the District of Columbia’s tax rate on blighted properties), this could raise up to $14 million per year.[xxi]
  • Create local tax credits for working families. Baltimore can strengthen working families’ economic security by creating a local match to the state Earned Income Tax Credit, a step Montgomery County has already taken. The city could also create a local counterpart to the state and federal Child Tax Credits.
  • Strengthen housing investments. The most straightforward way to make life in Baltimore more affordable is to invest in affordable housing. This could include funding development of new housing as well as strengthening assistance to renters with low incomes. We could double Baltimore’s locally funded housing investments for roughly one-sixth of the cost of the tax cut plan.[xxii]
  • Expand local jurisdictions’ revenue options. Like about half of Maryland counties, Baltimore City currently levies a 3.2% income tax, the highest allowed under state law. A 2024 bill would have raised this cap to 3.7%, enabling the city to raise more revenue from its wealthiest residents.[xxiii] As the Blueprint for Maryland’s Future raises local school funding responsibilities, Baltimore City is far from alone in needing fair and effective revenue options. State lawmakers should increase the county income tax cap in their 2025 session.

 

Endnotes

[i] Bob Cenname, Laura Larsen, and Pedro Aponte, “City of Baltimore BBMR Management Research Report: Analyzing the Impact of the 2024 ‘Renew Baltimore’ Charter Amendment Proposal on Property Tax Rates,” Baltimore City Bureau of the Budget and Management Research, 2024, https://bbmr.baltimorecity.gov/sites/default/files/BBMR%20Report_Analysis%20of%20Renew%20Baltimore%20Tax%20Reduction_FINAL.pdf

[ii] Christopher Meyer and Musaab Ibrahim, “Radical Tax Cut Proposal Would Spell Disaster for Baltimore,” Maryland Center on Economic Policy, 2022, https://www.mdeconomy.org/radical-tax-cut-proposal-would-spell-disaster-for-baltimore/

[iii] Baltimore City FY 2025 Budget, https://bbmr.baltimorecity.gov/sites/default/files/FY2025%20Executive%20Summary%20(1).pdf#page=39

[iv] Cenname, et al., 2024, p. 6

[v] Cenname, et al., 2024, p. 12.

[vi] Personnel impacts based correspondence with BBMR staff.

[vii] Michael Leachman, Michael Mitchell, Nicholas Johnson, and Erica Williams, “Advancing Racial Equity with State Tax Policy,” Center on Budget and Policy Priorities, 2018, https://www.cbpp.org/research/state-budget-and-tax/advancing-racial-equity-with-state-tax-policy

[viii] Michael Mazerov, “Kansas Provides Compelling Evidence of Failure of ‘Supply-Side’ Tax Cuts,” Center on Budget and Policy Priorities, 2018, https://www.cbpp.org/research/kansas-provides-compelling-evidence-of-failure-of-supply-side-tax-cuts

[ix] Cenname, et al., 2024, p. 8

[x] MDCEP analysis of Bureau of Economic Analysis population data for all United States counties, 1990–2022. Analysis covers seven-year periods ending between 1997 and 2022.

[xi] Iris Lav and Michael Leachman, “State Limits on Property Taxes Hamstring Local Services and Should Be Relaxed or Repealed,” Center on Budget and Policy Priorities, 2018, https://www.cbpp.org/research/state-budget-and-tax/state-limits-on-property-taxes-hamstring-local-services-and-should-be

[xii] MDCEP analysis of Bureau of Labor Statistics Quarterly Census of Employment and Wages

[xiii] Estimated using the Google mortgage calculator. Assumes a 30-year fixed-rate mortgage with a 7.4% interest rate and an $875 annual homeowners insurance premium. Includes the 0.112% state property tax and a 0.200% Targeted Homeowners Tax Credit. With a 3% down payment and $200 monthly private mortgage insurance, the decrease is 9.1%. With a 20% down payment, the decrease is 11.4%.

[xiv] MDCEP analysis of IRS tax year 2020 deductions data for corporations (including C- and S-corporations), partnerships, and nonfarm sole proprietorships, and EY/COST local property tax data for fiscal year 2022. While tax year 2020 revenues are likely realized across multiple fiscal years, the calculation is not substantially sensitive to the choice of fiscal year data.

https://www.irs.gov/pub/irs-pdf/p16.pdf#page=38

https://www.irs.gov/statistics/soi-tax-stats-partnership-statistics-by-sector-or-industry

https://www.irs.gov/statistics/soi-tax-stats-nonfarm-sole-proprietorship-statistics

https://www.ey.com/en_us/insights/tax/state-and-local-businesses-taxes-for-fy22

[xv] MDCEP analysis of 2023 Quarterly Census of Employment and Wages and 2018–2022 IPUMS American Community Survey microdata. In 2023, wages of local government employees located in Baltimore City (excluding educational services) totaled $949.2 million. Between 2018 and 2022, among local government employees working in Baltimore City (excluding educational services), Baltimore City residents took home 42.1% of total wages.

[xvi] “Wicomico County Revenue Cap,” The Greater Salisbury Committee, 2017, https://greatersalisbury.org/wp-content/uploads/2018/03/Wicomico_County_Revenue_Cap_10.23.17.pdf

[xvii] Cenname, et al., 2024, p. 14

[xviii] MDCEP analysis of DLS local revenue data for FY 2022 and Bureau of Economic Analysis population and personal income data for 2021 and 2022.

https://dls.maryland.gov/pubs/prod/InterGovMatters/LocFinTaxRte/Local_Government_Finances_FY_2022.pdf

[xix] While the Targeted Homeowners Tax Credit is available to essentially all city homeowners, the Supplemental Credit is targeted to homeowners with low incomes.

[xx] See House Bill 2 of 2024, https://mgaleg.maryland.gov/mgawebsite/Legislation/Details/hb0002

[xxi] As of June 2024, there are 12,393 vacant building notices on privately owned properties in Baltimore City. Average value estimate of $15,000 is based on an informal review of Zillow data.

https://app.powerbigov.us/view?r=eyJrIjoiOThlNTVkNGEtMWYyOC00Y2FlLTg0ODEtMDRhODEzNTFjMWJmIiwidCI6IjMxMmNiMTI2LWM2YWUtNGZjMi04MDBkLTMxOGU2NzljZTZjNyJ9&pageName=ReportSection

https://otr.cfo.dc.gov/page/vacant-real-property-0

[xxii] Excluding state and federal funds as well as non-housing-related expenditures, the Baltimore City Department of Housing and Community Development combined operating and capital budget for FY 2025 totals about $86 million. If housing investments grow at the same rate as total city general fund expenditures, they will total about $105 million in FY 2032, or 16.8% of the Renew Baltimore cost.

[xxiii] See House Bill 470 of 2024, https://mgaleg.maryland.gov/mgawebsite/Legislation/Details/hb0470