The proposed recordation tax legislation (CR85-2020) was a hot topic during the recent Howard County Council budget work session. Prior to that work session on Friday Councilman Opel Jones posted a statement on Facebook. Part of that statement was the following:

“Although I am stunned with the submission of my colleagues’ budget amendments, I remain steadfast that the best solution to balance our county’s budget is a progressive recordation tax restructure proposed by Councilwoman Christiana Rigby. The proposed legislation is NOT an increase, it is a restructure, and will generate $20 million in revenue for the county’s Operating Budget.

According to the County Auditor, 76% of this revenue comes from a 2% tax on real estate transactions over $1 million–ensuring that land developers and corporations continue to pay their fair share to support our top-rated school system. Furthermore, this pragmatic approach lowers the recordation tax on home equity loans and makes ownership for first-time homeowners more attainable. Again, this is NOT an increase as some of my colleagues will have you believe; it is a restructure. Some residents will pay less recordation tax, some will pay the same, others will pay more.

I am proud to co-sponsor this progressive restructure of the county’s Recordation Tax, which will invest in our communities and schools. I believe this common-sense approach to balancing our county’s budget is rational and fiscally responsible without “gutting” essential services for our 352,000+ residents. This proposal would DECREASE the recordation tax for anyone buying or selling a home under $300,000, and would minimally increase the recordation tax for anyone buying or selling a home under $436,000, the median sale price last year. To put this in context, unless you are buying a home, selling a home, or conducting some other real estate transaction, you DO NOT PAY the recordation tax.”

That part of his statement about the proposed budget amendments got me thinking…is this a tax restructure or a tax increase? The simple answer is that this proposed legislation is actually both.

First let us look at the restructure question.

The current recordation tax structure is a simple $2.50 per $500 tax. Super simple and super easy to calculate for residents.

The proposed recordation tax structure in the legislation is:

  • $2 per $500 for the first $0 to $250,000
  • $5 per $500 for the next $250,001 to $500,000
  • $8 per $500 for the next $500,001 to $1,000,000
  • $11 per $500 for $1,000,001 and above

I know…not as simple a formula to figure out…thank goodness Dr. Chao Wu provided us a breakdown (note – I copied his chart and put it in Goggle Sheets so you could see it online and not have to download a copy): https://docs.google.com/spreadsheets/d/1JFy5T2CKZgS9FSWNZryhmwnJpUpxXxqVILSyoT4OskQ/edit?usp=sharing

Now that we have the restructure question out of the way and a chart to see what the new taxes would be…we have to ask the question…is this a tax increase? The answer is yes for any buyer or seller of a property with a value over $300,000.

As you can see from the chart this is a tax decrease for all property purchases and sales under $300,000…$300,000 is the break even and then the tax rate starts to increase for properties over $300,000.

This is clearly a progressive tax increase of all properties with values over $300,000….starting at a low tax increase at $300,500 and rising significantly as property values increase. This would affect not only developers but the current home owners looking to sell their property and future home buyers in Howard County. (As a note – according to Zillow today: The median home value in Howard County is $459,507)

So there we have it…the answer to the question asked in the title is that this legislation is both a tax restructure and a tax increase on properties valued more than $300,000.

Now if the target of this legislation is the $1,000,000 properties that would generate 76% or the revenue (or nearly $16 million based on the HoCoGov proposed budget statement that the proposed recordation tax would generate $21 million in revenue)…maybe this would be a good idea:

Leave the in tax decrease in for properties under $250,000. Tax properties valued at $250,001 – $1,000,000 at the current tax rate. Propose a tax rate needed for the funding for properties valued over $1,000,000 that would generate that $16 million into the budget for next year (I have not done that math but I am sure someone in the HoCoGov budget office can do it quickly).

This would still be a progressive tax (maybe not as progressive as the proposed legislation) that would be targeting the really well to do home buyers and sellers and the developers and letting other home owners and buyers not burden this tax increase during this global pandemic that is devastating our economy, our businesses, our work stability and our personal finances.

That is just my thought. I am sure I will hear from many why this is a bad idea. They may all be correct and this is still not a great thing to do in this current economic environment. I will admit that I am not an expert and will leave it to those that are experts and those in charge of legislation to figure out the best course of action. Just thought I would put out an idea for people to kick around a bit.

Here are other recent blog articles related to this topic:

Howard County Council Member Liz Walsh responds to comments about proposed amendments to the FY21 budget

Howard County Councilwoman Christiana Rigby posts online about the proposed amendments to the FY21 Budgets

Council Members Yungmann, Jung and Walsh Advance Amendments to reduce the FY21 Capital and Operating Budgets

Howard County Council Member David Yungmann Comments on Proposed FY21 Tax Increases

The County Council is meeting on Wednesday May 27th at 10:00am to deal with legislation related to the Budget Adoption. If you support this recordation tax legislation or oppose it…make sure they know how you feel: councilmail@howardcountymd.gov

Have thoughts on this topic…let me know in the comments.

Scott E

5 COMMENTS

  1. Simple, it’s a tax increase if the new methodology raises more revenue than the previous one. Clearly this is an increase as Jones & Rigby are touting the approx $20 mil additional revenue. Of course, the revenue will only be generated if the property sales take place. But the proposed additional spending will take place no matter what. I also strongly suspect that the thresholds for the higher rates are not indexed to inflation. As time passes and property values increase this tax will be hitting more and more homeowners. Just say no. County govt will need to tighten their belt these next few years, just like many of us citizens have had to as a result of the continuing closure.

  2. It is a ‘robin hood’ tax.

    I do not see property values increasing much in the future.

    If they think they are going to make the developers pay this from their profit, they are kidding themselves.
    The new property owner is going to pay (or eventually pay) the fee.

    There is not a lot of property left in the county that can be developed.
    Many of the farms in HoCo have already sold the developing rights.
    And, the few remaining farms with developing rights have no interest in selling them.

    The ‘salt’ tax is making the wealthiest of our community leave the state.

  3. We are in an economic crisis. Increasing this tax will further discourage people from moving into Howard County – I say further because this comes on top of the redistricting fiasco – especially wealthier people who will bring more money into our county and pay more property tax. This is a bad plan.

  4. Opel Jones can twist the vocabulary any way he likes, but it’s still a tax increase on “some” of the population. If you were given a choice between a county with a progressive recordation tax, a constant threat of redistricting & turmoil for your children, and an extended shutdown because your executive has chosen to cut funding to your health department in favor of school bus cameras or let’s say another county or state that isn’t trying to tax you because you can afford something nice, will allow you to plan an educational trajectory for your child without the threat of redistricting, and is actually prepared to reopen their economy after lockdown rather than whine that we didn’t expect the governor to let us out and we aren’t prepared, which would you choose? There is no reason to come to or stay in Howard County anymore. Taxes, redistricting, and nothing to do because 42 people succumbed to coronavirus. There’s nothing positive here. Just a drain on our resources and a snitch line for the abundance of social media deputized “Karens” to call.

  5. Maryland was the 3rd highest closing cost state for realty transactions the last time tax increases were proposed. Jobs & families were going to NoVa or not coming at all. Since then the State transfer tax has been reduced by half for 1st time Md buyers, & collect property taxes semi-annually for owner occupied properties.
    Raising HoCo taxes & fees kill the goose that lays the golden eggs. Average residential “19 sale was $464,000 netting HoCo $6960, the highest in our region just above AA Co, but only behind MoCo in the D.C. area. The new fees will be $10,100 to HoCo, 31% increase for an average home. 1st Qtr ’20 detached average price was just above $600,000 netting $9,000, but would increase 36% to $14,100. Fees are county only ex: State .5%, & any ACA tax applicable. This places Howard County & the State at an disadvantage, now & in the future.
    Do-gooders want to do good, but there is a litany of unintended consequences. Just like the Bag tax, if the county wants less of something raise the taxes. Hmmm goose is tasty.

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