County Executive Schuh Offers Income Tax Reduction Alternative

With passage of his proposed property tax reduction questionable, Anne Arundel County Executive Steve Schuh has offered the County Council an alternative, a reduction in the local income tax rate. As reported by the Annapolis Capital,

Schuh shifted his tax cutting plans Monday, announcing a plan to submit a 4.2 percent income tax cut instead of his proposed 3 percent property tax cut. This would lower the rate from 2.56 percent to 2.45 percent.

Flanked by County Councilmen John Grasso, R-Glen Burnie, Michael Peroutka, R-Millersville, and Derek Fink, R-Pasadena, the county executive made the announcement in Annapolis, saying the new tax cut is an attempt to bring along other council members on board while still saving tax payers an average of $80 a year.

During deliberations on the budget, council members expressed concern with the property tax reduction proposal saying it was not fiscally prudent because it would increase the county’s structural deficit.  As reported in a previous article in the Annapolis Capital, council members suggested setting the property tax rate at the maximum rate allowed under the county’s tax revenue cap.

Council members said by setting the property tax rate to the maximum allowed under the tax revenue cap — still a tax rate cut because of rising assessments, but making property owners pay more — that cash could be used to decrease the county’s expected $25 million structural deficit or pay for much needed capital projects Schuh wants to finance by extending the life and cost of bonds.

Last week, at the request of council members for tax reduction alternatives, the County Auditor proposed a reduction in utility rates. Council members stated that this reduction would provide taxpayers relief, while not increasing the structural deficit. County Executive Schuh opposed this reduction and instead offered an alternative to reduce the income tax rate. As reported by the Annapolis Capital,

“There were a lot of concerns raised about the property tax cut because we are a tax cap county,” Schuh said. “I was willing to give ground on it.”

The income tax cut would lower annual county revenues by about $19 million — the same as the property tax cut — but wouldn’t have the long-term ripple effect on the county budget that the property tax cut would, Schuh said.

Anne Arundel has a tax cap: Property tax revenues can rise each year by only 4 percent or the rate of inflation, whichever is less. So a tax cut there would have progressively lowered revenues each year.