Inventory Tax comment, February 8, 2017

Comment I sent to the members of the Takoma Park City Council, February 8, 2017:

Dear Councilmembers,

I note the council’s February 8, 2017 discussion of personal property taxes, prompted by the large bill faced by Priti’s Fashion and Jewelry.

It would be appropriate for the city to waive the over $80,000 in penalty interest owed by Priti’s, suspend further interest penalties for the years 2013-6, and  direct the city manager to work out a multi-year finance plan with the business, and I urge you to put action on the inventory tax on the council agenda in time to have a change go into effect July 1, 2017. More on that topic below.

I oppose the council’s forgiving Priti’s back taxes and expect that forgiveness would prompt hundreds of Takoma Park businesses to demand refunds of past years’  taxes. Actually, I question whether the council even has the legal authority to forgive a single payer’s back taxes, but if do move ahead with forgiveness, you might limit it to the amount above what any other commercial businesses paid in each of the subject years, to forestall refund requests.

Incidentally, the backgrounder (https://documents.takomaparkmd.gov/government/city-council/agendas/2017/council-20170208-5rev.pdf) misstates the contribution of Priti’s PPTs to the city. PEPCO pays personal property taxes 2.5 times what Priti’s pays, and Washington Gas pays almost as much annually.

Please act soon to rework or eliminate the inventory tax. A homestead-type exemption for locally owned businesses (with a suitable definition of locally owned) could be implemented immediately in order to take effect July 1, 2017 with modest loss of revenue beyond other than Priti’s. Second best, elimination of the inventory tax (or all PPTs) in favor of a switch-over to multiple real-property tax classes, with commercial properties taxed at a higher rate, would need to be phased in over several years, I think, and therefore wouldn’t provide needed immediate relief.

Other approaches would not work. A cap on inventory taxes paid by a single business would help Priti’s but would unnecessarily reduce taxes paid by Aldi’s and Walgreens, for instance, without revenue replacement. An inventory exclusion — which I think is not a good idea for other reasons — would solve Priti’s’ problem even
less.

Thank you for considering this comment.