184

REMARKS ON FISCAL REFORM, DELIVERED INFORMALLY

BEFORE THE ALLEGANY COUNTY COMMISSIONERS

AND GUESTS

CUMBERLAND

April 27, 1967

There had been a trend up until the time we enacted this tax reform
to leave to the local government its own problems of financing what
have traditionally been local needs. The State did provide a certain
amount of money in the sharing of income tax, but it was reluctant to
ever increase that amount.

Back when the income tax first became part of our system of revenue
structuring, in 1947, and in the subsequent studies of the Sherbow
Commission, in 1949, the local governments shared in the income tax
at that time to the extent of receiving one dollar of every $3 collected
from their residents for local purposes.

Then, as the State's needs became greater, the tax was increased from
2 percent to 3 percent, in 1958, and the local governments' share did
not increase. The local governments at that time were having just as
difficult a time financing their needs as the State was, but the State
gave them no more money to do it with—consequently, they had to
turn to the property tax, and the property tax began to grow as a local
fund raiser until in the larger suburban areas it was financing as much
as 90% of the total local effort.

Now anyone familiar with local finance will tell you this is a bad
situation. It's bad because the property tax hits only one type of tax-
payer—the one who owns his own home. It is particularly harmful to
those on a fixed income. I admit that reflected in rentals is a certain
amount of property tax expense because the landlord is bound to raise
the rent as his taxes go up, but the people who have saved and accu-
mulated money to buy a home during their productive years when they
were earning money and then retired on a fixed income, found that
the constantly escalating economy was causing a great deal of trouble.
They weren't able to buy the same commodities with the same amount
of money and therefore their fixed incomes were really not what they
had intended them to be. They shrank in purchasing power. Their
taxes were constantly going up as every other price was going up and
many of them found themselves in a position where they actually had