Montgomery County Council Nixes Idea To Allow Property Tax Prepayments

Council members said the proposal could create confusion


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County Council member Roger Berliner’s proposal to let property owners prepay their 2018 Montgomery County taxes to avoid higher federal payments next year is dead.

Council President Hans Riemer sent a memo to County Executive Ike Leggett Thursday morning informing him that a majority of the council opposes the idea.

The memo expresses council members’ concerns that letting residents prepay would require a rapid implementation process before the end of 2017 that could result in confusion and errors.

“Furthermore, the Council would be making this decision without the benefit of public hearings or a thorough analysis of the fiscal impact,” the memo says. “Given that the law would have an impact on county revenues by reducing taxable income for some residents, it seems best to conduct the usual legislative process, but unfortunately that is not feasible in the time we have.”

Berliner pitched the idea as a way for property owners to reduce their tax payments before the federal tax-cut bill approved by Congress Wednesday goes into effect. President Donald Trump has said he will sign the bill.

The tax-cut bill caps the state and local tax deduction to $10,000, which is expected to result in higher income tax payments for individuals who itemize their deductions and have high-value homes or properties—such as those valued at $1 million or more.

The bill bans prepayment of income taxes, but did not do the same for property taxes, which has led to suggestions from experts to consider prepaying property taxes to reduce payments before the bill goes into effect. Washington, D.C., Mayor Muriel Bowser announced Wednesday the city would accept 2018 property tax prepayments.

While Maryland has authorized counties to pass legislation to accept prepayment of property taxes, the county has not done so.

Berliner proposed introducing a bill in January that, if approved by the County Council, would be retroactive to enable the county to collect payments before the end of the year. Berliner said he believed the policy would not affect the county’s revenue, although it could potentially reduce income tax revenue.

On Wednesday, County Executive Ike Leggett sent a memo to Riemer asking for written confirmation that a majority of the council would support the proposed legislation before he authorized the county to accept prepayments.

“Creating a process and mechanism to accept prepayments in this short period of time will be complicating and challenging,” Leggett wrote. “We will need to be prepared for criticism and complaints that will inevitably result from providing this service under the pressures of time.”

Ultimately, a majority of council members had too many concerns to support the proposal, Riemer said in an interview Thursday.

“I think a lot of people felt there are so many uncertainties and unknown impacts for us to rush into this,” Riemer said.

He noted that council members would have had to support the policy without holding a public hearing or debating the measure publicly. Riemer also said the plan may result in less income tax revenue for the county.

Property tax revenue makes up about 46 percent of the county’s $5.4 billion operating budget, while income tax is about 41 percent, according to county budget data.

“It just doesn’t seem right to commit to a policy that has all these consequences without really getting any public input,” Riemer said. “If this was something that was introduced several months ago and worked through, it might have been appropriate.”

Berliner, who initially thought he had support from his colleagues on the proposal, said in an interview that he stands by his attempt to make it happen.

“This [federal] tax bill is so bad for our county,” Berliner said. “I thought we should explore every opportunity to help our residents save money.”

He described the proposal as a “bridge too far, too fast.” He added that he initially believed that the interest the county could potentially make on prepaid property tax payments would offset any losses in income tax revenue, but there was no analysis that could be prepared in time to back up this belief.

Council member Marc Elrich said Thursday he declined to support the proposal without knowing what impact it would have on county revenues.

He also said he didn’t want to support a proposal that is predicted to mostly benefit wealthy people who own expensive properties. If the county loses revenue as a result of the policy, it would likely result in cuts to county services for low-income residents, he said.

He described the policy as a “good political gimmick,” but added, “I wouldn’t want to run a government that way.”

Riemer said he was also concerned the proposal would primarily benefit wealthy residents. He noted the people who can take advantage of the policy would be those who have thousands of dollars available to prepay their 2018 property tax bills—something many county residents don’t have the ability to do.

“We would face questions about how fair our effort was,” Riemer said.

Timothy Firestine, the county’s chief administrative officer, said Thursday the county won’t proceed with setting up a process to collect prepayments after the council said they wouldn’t support the policy.

Council member George Leventhal said he’s received conflicting information from tax advisers about whether the prepayment policy would in fact avoid the higher tax payments expected as a result of the federal bill.

“Roger jumped in with both feet,” Leventhal said. “But a majority of council members said no. We have a lot of conflicting priorities now and we’re facing a budget crunch. We’d be causing confusion and distress right before the holidays.”

Montgomery County Council President's memo on prepayment of property taxes idea

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