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What's the new Pr. Geo's tax break worth?

Gov. Martin O'Malley signed a controversial tax measure into law Tuesday that could complicate the budget process in Prince George's County because, his spokesman said, he considered tax relief for residents to be more important at this time.

But just how much savings, on average, will county residents see as a result? The answer is "difficult" to determine, according to Craig Biggs, legislative liaison for the state department of assessments and taxation, who tracked the bill closely.

The bill places a cap on taxes residents pay to the Maryland-National Capital Park and Planning Commission. The taxes are based on property assessments, and the cap is designed to shield residents from large hikes in their tax bills due to sudden increases in their property values.

However, under the new law, residents will get credit for portions of assessments that exceeded the cap--110 percent of the home's original value--in prior years, not just when they exceed the cap going forward, Biggs said. That will bring residents quicker savings, Biggs said, because property values are not likely to jump that much in the current market.

For example, if a homeowner bought a house in the year 2004 for $100,000, and in 2005 its value was reassessed at $160,000 and stayed there, the resident would only be taxed on $110,000 in the 2010 park and planning tax bill, Biggs said.

The cap only applies to owner-occupied residential properties.

All this is by way of saying that each resident's tax savings is unique, so figuring out the "average savings" for residents is a tall order.

"It's difficult to come up with an average, because each value on each property is different, and therefore the caps for every property are different," Biggs said. "One of the biggest variables in all this is: When did you buy the property, and what's happened to the market since you owned it?...No matter which house you look at, it's going to have a different number."

Sen. Douglas J.J. Peters (D-Prince George's), a lead proponent of the measure, said shortly after the bill passed that a typical household would see a $500 to $800 savings on its next tax bill.

However, Biggs said that estimate was based on a very small sampling he conducted.

To get a picture of what kind of savings residents might see under the new law, Biggs examined three properties from three different Zip codes in the county. After the numbers were crunched, the savings on the next tax bills for those properties ranged from $130 to $720, Biggs said. There are about 130,000 homes in the county that would be eligible for the cap, he said.

So, long-story-not-so-short, Peters's estimate was technically in the ballpark, but residents can expect a wide variation in savings depending on their property's history.

Biggs said he has since examined a few more properties, and found the range to go as low as $30 in savings.

Right now, estimates for how much the commission will lose in tax revenue next year because of the new law are around $18 million, according to Biggs and memos circulated by the commission's general counsel during the general assembly session. Biggs said the aggregate revenue loss is much easier to calculate than the average savings for a homeowner, and added that all figures are based on the assumption that current park and planning tax rate remains the same.

UPDATE, 5:25 p.m.:
In response to an inquiry from the Post, Andrea Davey, spokeswoman for the commission, said in an e-mail, "According to our calculations, the owner of an average/typical $300,000 house would save approximately $60 on their tax bill under this legislation." She did not elaborate on how that figure was reached.

The commission opposed the legislation in its final form.

By Jonathan Mummolo  |  May 5, 2010; 10:57 AM ET
 | Tags: Douglas J.J. Peters  
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