BlueRidgeForum

UPDATE July 19! An alert reader writes:
“Mortgage Recordation Fees Take a Big Bite from Maryland Homeowners. The most annoying local fee (really a tax) I see these days in Maryland is a ‘mortgage recordation tax’ charged by each Maryland county plus Balt. City for the ‘privilege’ of recording a lien on real property. The fee ranges from a low of $5.00 in Baltimore County to a high of 10.00 per thousand of adjusted value for the unfortunate residents of Baltimore City. For purposes of this tax, adjusted value is 150% of appraised value

Here is a sample calculation on a mortage of just $100K in Baltimore City:
$100,000 x 1.5 = $150,000 a 10.00 = $1,500 due.

The sad thing is seniors who take out a reverse mortgage get hit with the full tax, even though just refinancing an often paid-up home. They pay the full tax even only taking out monthly income from the reverse mortgage instead of lump sum cash out. With the wave of conventional loan refinancing on the wane, local governments will be in little mood to consider a roll-back on these fees.

You would think seniors would at least get some kind of break. Someone should tell AARP.”

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What would taxpayer advocates do without the Tax Foundation?

Last week, that non-partisan professional group published a most instructive “County and City Income Taxes Clustered in States with Poor Tax Climates” here. Foundation Tax Counsel Joseph Henchman found:

“. . . [L]ocal-level taxes on wages and income are clustering in areas with poor business tax climates. Philadelphia is one of just six of America’s twenty largest cities by population that impose a city- or county- level tax measured by compensation, be it a tax on wages, earned income, or occupational privilege…(The others are New York City, Detroit, Indianapolis, Columbus (OH), and Baltimore. It should also be noted that Washington, D.C., while imposing a state-like income tax on its residents, has long sought to impose a ‘commuter tax’ on nonresident workers, but is prohibited from doing so by federal law.” (Underscoring Forum’s.)

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Among the states with extensive local-level wage and income taxes are Indiana, Kentucky, Maryland, Michigan, Ohio, and Pennsylvania. With the exception of Indiana, each of these states were in the bottom half of the country in the Tax Foundation’s 2008 State Business Tax Climate Index. Indiana, Michigan, and Pennsylvania also are among the ten states with the most outbound moves according to United Van Lines’s 2005 Migration Study. (Underscoring Forum’s.)

The Foundation followed up here this week with a list of Maryland county income taxes - - - noting that:

“Nonresidents are not subject to the county income tax, but must pay to the state an amount equivalent to the lowest county tax rate (currently 1.25% - Maryland residents should thank Worcester County for keeping this low!).” (Underscoring Forum’s.)

As for Virginia, Staff Economist Josh Barro in “State Lawmakers Promote Sound Tax Policy by Doing Nothing” wrote here last Tuesday:

“The special session produced much partisan bickering and recrimination, but no new taxes, as the Republican House of Delegates and Democratic Senate could not come to terms on a plan. After the session crumbled on Thursday, Kaine offered what appears to have been praise for legislators:

‘I don’t think I’ve ever seen a group work so hard to do nothing. It was doing nothing taken to an art… It was like a “Seinfeld” episode, the show about nothing.’

We agree: Seinfeld was a great television show, and ‘nothing’ was a great outcome for this special session.”

Click here for Foundation tax-climate facts on Virginia, and click here for tax-climate facts on Maryland.

Note that both states “receive more federal funding per dollar of federal taxes paid compared to the average state.”

Per dollar of federal tax collected in 2005, Virginia citizens received approximately $1.51 in the way of federal spending. This ranks the state 10th highest nationally and is the same as in 1995 when Virginia also received $1.51 per dollar of taxes in federal spending (ranked 4th). Neighboring states and the amount of federal spending received per dollar of federal taxes collected were: Maryland ($1.30), West Virginia ($1.76), Kentucky ($1.51), Tennessee ($1.27), and North Carolina ($1.35).
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Per dollar of federal tax collected in 2005, Maryland citizens received approximately $1.30 in the way of federal spending. This ranks the state 18th highest nationally and represents an increase from 1995, when Maryland received $1.27 per dollar of taxes in federal spending and also ranked 14th nationally. Neighboring states and what they received in federal spending per dollar of federal tax collected was: Delaware ($0.77), Pennsylvania ($1.07), West Virginia ($1.76), and Virginia ($1.51).

But as economists Steve H. Hanke and Stephen Walters warned here about the effects of such subsidies from taxpayers in other states:

“Thanks to the federal tax dollars collected from the rest of the country and spent in Maryland, the prevailing view of economic reality is inverted: The public sector is seen as the engine of prosperity, with the private one along for the ride.”

Forum wonders whether there is a similar effect in Virginia where the subsidy is even greater.

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