Mommy and Daddy are fighting about money again. Daddy lost his job because of the pandemic, and they must figure out how to live only on Mommy’s income. Mommy wants to stop buying fresh produce for home-cooked meals and switch to Hungry-Man TV dinners to save money. Daddy thinks they should invest some money into creating a backyard garden so they can grow their own produce instead. Mommy thinks that idea is ridiculous, because in times like these, they should be saving money, not spending it. Daddy says that spending this money now will save more money on grocery bills in the long run, and they could grow enough produce to sell some to their neighbors, which would generate income. Mommy says she’s simply being fiscally responsible, duh! and that switching to TV dinners to save money is simply common sense and they shouldn’t be trying to make money off the backs of their hardworking neighbors during a pandemic. Now Daddy is sleeping on the couch.
This is what it’s been like with the County Council’s budget work sessions this week. They are looking at ways to spend less, which sounds like a reasonable, common-sense decision when facing an economic recession. Except that managing a government budget, especially during an economic crisis, is not as simple as managing a household budget. At all.
It’s hard to know where to begin with all of this. The Reader’s Digest version is that three Council members, Deb Jung (D4), Liz Walsh (D1), and David Yungmann (D5), are proposing a set of draconian cuts to both the capital and operating budgets to reduce spending as the local economy suffers from COVID-19. Two Council members, Opel Jones (D2) and Christiana Mercer Rigby (D3), have proposed a restructure of the recordation tax to generate revenue. On their faces, these proposals look, respectively, like fiscal responsibility vs. tax hikes. However, characterizing the proposals this way is a gross oversimplification that does not take into account the real consequences of each.
The list of cuts proposed by Jung, Walsh, and Yungmann is long and comprehensive, and the negative impacts will be felt by just about everybody in one way or another. There will be impacts to public school students, senior citizens, the disabled, the arts, public safety, and infrastructure – including cuts for stormwater drainage projects in historic Ellicott City, which was a real head-scratcher coming from Ms. Walsh. Projects such as a new senior center and desperately needed renovations to two schools who serve high-needs populations will be cut or postponed. ADA ramps, sidewalk repairs, and pedestrian safety improvements will be cut. The “fiscal responsibility” label being applied to these cuts makes it sound virtuous, but is it fiscally responsible to cut funding for infrastructure maintenance projects when they tend to become more expensive (not to mention dangerous) the longer they are deferred? Is it fiscally responsible to put more Howard County residents and businesses out of work by eliminating positions and canceling construction projects? Is it fiscally responsible to postpone the New Cultural Center (NCC) project when doing so puts us at risk of losing already-secured state and federal dollars for affordable housing units that will be sorely needed by families struggling financially due to the pandemic? Budget decisions that cut spending may be fiscally responsible, but if they result in crumbling infrastructure, reduced public safety, or our more vulnerable and less wealthy populations bearing the brunt of the negative impacts, then they are not morally responsible.
State and local governments play a crucial role in forestalling the most severe economic impact from a public health crisis. When a pandemic-related recession drives consumers to spend less and businesses to invest less, local government spending can keep people working and businesses running. Conversely, reductions in public spending and cutbacks on essential services squeeze the economy even tighter and create holes in the safety net that sustains citizens in financial crisis. It is important for local governments to continue spending and investing when no one else can. But since income and sales tax revenues are bound to decrease during a recession, what can be done to generate revenue elsewhere?
Enter the proposed restructuring of the recordation tax rate.
Currently, the recordation tax rate in Howard County is a flat rate of $2.50 per $500 spent on a real estate transaction. Dr. Jones’ and Ms. Rigby’s proposal changes this flat rate to a tiered structure, with transactions over $1M being subject to a 2% rate. The result is that less expensive transactions, including home equity loans and lower-priced starter homes, will require less recordation tax than they do now. And more expensive transactions, such as residential development, commercial properties, and upscale home sales, will require more than they do now. This change will increase the likelihood that the less wealthy among us will purchase homes or secure loans, while likely not deterring developers and the wealthy from conducting real estate business. The resulting tax revenue is projected to be approximately $20M for our operating budget.
Sadly, and predictably, many are excoriating Dr. Jones and Ms. Rigby for their proposed “tax hikes” and lauding Ms. Jung, Ms. Walsh, and Mr. Yungmann for their “fiscal responsibility.”
When I think of progressive values, I think of protecting vulnerable populations, providing equitable opportunities in education and housing, and protecting our environment, among others. A local government who makes budget cuts that will have the greatest negative impact on the more vulnerable and less wealthy among us, that will exacerbate the economic recession, that will put affordable housing opportunities at risk, that will prevent environmental protection projects from moving forward – while avoiding raising taxes on those who can afford million-dollar real estate transactions – is not making decisions in accordance with progressive values.
Let’s plant that garden so it can grow.