PROGRAM ON TAX REFORM 105

crease; $8, 000, present tax $120. 00, new tax $168. 00, net increase of
$40. 00 to you; $10, 000, $174. 00 versus $276. 00, or an increase of $82. 00.
These changes include what we call Federal absorption. In other
words, your State tax is a deduction on your Federal return and you
get a certain amount of credit for that. $12, 000, $228. 00 versus $384. 00
for a net increase of $125. 00; $15, 000, $309. 00 versus $546. 00 for an in-
crease of $185. 00.

Now, I want you to remember that what we've just compared is
income tax versus income tax, and as I indicated to you earlier this
is not the total picture — because you have to see what that $95
million I mentioned earlier is going to do to help your county or
city hold down the property tax.

Let's look at a typical example in Baltimore City. A person with
$8, 000 annual income and a home valued — that's current market
value — at $9, 500 will pay $10. 00 more by way of income tax but
will save in property taxes, due to the fact that that $95 million or a
portion of it is going back to the city to help meet local needs, $80. 00,
a net saving of $70. 00. Now, I want to emphasize that this doesn't
necessarily mean that your property tax is going to be lowered. I can't
control what the needs are in your subdivision. That's a matter for
local determination. But whatever the increase would have been, it
will be lessened by the money we send back.

Here's another Baltimore City example: income $12, 000, a home
valued at $20, 000. 00; the income tax increase under the Lee amend-
ment to the Hughes-Agnew plan is $132. 00, the property tax saving
is $169. 00, representing a net saving of $37. 00. So you see I was right
when I told you that you can't look at the comparison in income
taxes alone, because that money that's flowing back to the city or the
counties is used to reduce property taxes.

Let's look at Baltimore County. Here's a family of four — and all
these examples are with a family of four — $12, 000 annual income
and a home valued at $17, 500. They would pay increased income taxes
of $125. 00, their property tax would be lessened by $60. 00, or they
would have a net increase in taxation of $65. 00 annually. But suppose
that this wage earner works in the City. In that case he becomes ob-
ligated to pay under the present system a half percent earnings tax to
the City which would account for another $60. 00, making his net in-
crease under the Lee amendment only $5. 00.

Let's look at Montgomery County, certainly a county that's wealthy
as a subdivision and a county from which a certain amount of fear