Montgomery County’s relationship with Maryland isn’t helping its financial woes.
The state recently cut $22.5 million in aid to the county, and many elected officials expect Gov. Martin O’Malley to suggest more cuts as he wrangles with a projected $2 billion budget deficit. Those cuts would make the county’s projected $600 million budget deficit even worse.
For every dollar the county’s residents and businesses spend on state taxes, the county gets 17 cents back in the form of direct state aid and contributions to teacher retirement funds, according to the most recent report from the Department of Legislative Services that looked at data from fiscal 2006.
But Councilman Mike Knapp, a Germantown Democrat and chairman of the county’s economic development committee, said that figure doesn’t give the whole story.
“It’s not like we give X away and we only give a little bit back, it’s a lot of the other policies that really hinder the ability for a place like Montgomery County to be as economically viable,” Knapp said.
He pointed to the state’s new tax on millionaires as one of those policies.
The county’s income tax revenues fell 11 percent between tax year 2007 and 2008 — the biggest drop in more than 25 years. Much of that decline can be attributed to a drop in the number of wealthiest taxpayers.
County economist David Platt said the number of county tax filers who had incomes over $500,000 fell from 9,300 in 2007 to 7,700 in 2008.
Figures showing whether the primary reason for that drop was from people moving away or from dropping income as the economy soured aren’t available.
But Knapp said he has heard that “a lot of folks who used to live in this county no longer live in this county because the state imposed a millionaire’s tax.”
