General Assembly Nixes Outdated, Confusing Constant Yield Tax Law

In a significant win for local governments and taxpayers alike, the Maryland General Assembly approved legislation to eliminate the antiquated, inefficient, and confusing constant yield tax law and instead provide constituents with a more efficient, accurate, and transparent overview of local policy decisions and deliberations.

The constant yield concept is that, as assessments rise, the tax rate should drop so that the revenue derived from the property tax stays constant from one year to the next. Because property assessments typically grow in value, constant yield rates are lower than the previous year’s tax rate.

Under current law, local governments must advertise and hold public hearings regarding proposals to enact a tax rate that exceeds the constant yield rate — even if the actual rate remains unchanged.

The advertisement must be published in a newspaper of general circulation, which is costly and inefficient — especially considering that in the sizable majority of cases, very few constituents submit testimony or attend the public hearing. And because the law requires the ad to include “Notice of Tax Increase,” taxpayers often do not understand that a county has simply adopted the same tax rate that had been in effect and that the notice is solely a function of a statutory requirement.

As amended, SB 114 repeals onerous and confusing constant yield notification requirements and instead requires a local government that intends to increase its real property tax rate to place a public notice in a newspaper of general circulation and publish a copy on its website. In addition, the bill requires local governments to include specified information on property tax bills.

From the bill’s fiscal note:

For fiscal 2023, five counties – Cecil, Harford, Queen Anne’s, Washington, and Wicomico – decreased real property tax rates, while Montgomery and Talbot counties increased their rates. Under the bill, only the two counties that increased their real property tax rate would be required to notify the public of their intention to increase the real property tax rate, compared to 19 counties and Baltimore City that would have been required to notify the public under the constant yield requirements. As a result, local expenditures for public notices are expected to decrease.

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