MENU

Reason.com

Free Minds & Free Markets

Maryland City Raises Property Tax on Businesses by 800 Percent, in Bid to Attract More Businesses

Now they're being sued for it.

Olivier Le Moal/Dreamstime.comOlivier Le Moal/Dreamstime.comHere's a good rule of thumb: If you want more of something, don't tax the dickens out of it. This principle appears to have eluded the town of Seat Pleasant, Maryland, which jacked up five businesses' property taxes by 800 percent as part of a scheme to attract more businesses to the community.

Now two of the targeted companies are suing, claiming the small suburb—located just outside D.C—violated everything from their own charter to the U.S. Constitution when it imposed the tax.

"It is backward economic thinking. It's borderline racketeering," says Steven Franco, who owns and operates the Discount Mart and is one of the plaintiffs in the suit.

Franco saw his property taxes shoot up from less than $6,000 to over $55,000 in less than a year. This, he says, has had an "extremely adverse impact" on his business. "People's schedules have been cut. Profits have been almost depleted....One guy had to get laid off."

Other plaintiffs in the lawsuit include married couple Si Quang Chen and Chang Lin Chen, who own a Chinese restaurant next to Franco's store. Their property tax bill went from $3,482 to $31,180.

In May 2017, the Seat Pleasant council passed a yearly budget that included a special assessment to fund a "Special Revitalization District for Businesses." The tax was supposed to bring in about $252,864 a year, which would be used to spur economic development and develop a "stronger financial portfolio" for the city.

According to Seat Pleasant's charter, a special assessment like the one levied on Franco and the Chens must be spent on specific improvements to the targeted taxpayers' properties—for example, by adding a sidewalk or sewer main. The city must also hold a public hearing on the assessment and give affected property owners a chance to appeal.

But the budget document makes it clear that the assessment is intended to benefit the entire town. Menawhile, the lawsuit alleges that Franco and the Chens received neither a public hearing nor a chance to appeal. The suit also claims that the tax violates the Fifth Amendment to the U.S. Constitution's prohibition on taking property without due process of law.

Mayor Eugene Grant, named as a defendant in the lawsuit, tells the local NBC affiliate that "all of these dollars are necessary for us to provide efficient and effective services for the residents of Seat Pleasant."

Grant is a controversial politician, who held court for several months in a tent outside the Seat Pleasant City Hall after the city council voted to bar him from the building because of alleged hostile behavior toward city staff. In 2016, he engineered a takeover of the city council with a slate of candidates favorable to himself, in an election that sparked accusations of voter fraud.

Grant has expressed a desire to redevelop the area occupied by the businesses that were hit by the assessment. Franco thinks the tax is intended to force him to sell his property to the city, which already owns sizable nearby lots. Grant had previously floated the idea of using eminent domain to seize Franco's property, according both to the lawsuit and to texts supposedly sent between Grant and Franco. (The texts have been posted to the website xposesp.com.)

Franco, whose store sells everything from milk to computers to school uniforms, says that Seat Pleasant is already a difficult place to do business, setting aside the special assessment.

Most Maryland personal property taxes—a tax paid on furniture, tools, and other movable property used in a business—are levied at less than 2 percent, with many towns and counties charging less than 1 percent or having no personal property tax period. Seat Pleasant's personal property tax, by contrast, is 15 percent, over six times the Maryland jurisdiction with the next-highest rate.

Franco says that such high tax rates, plus the treatment he and other business owners have experienced, will only discourage the economic development that local officials say they want to create.

"Anyone who is considering coming in to do business is going to have serious second thought," Franco says. "Seat Pleasant could be a great place, but their policies are backward economic thinking."

A pre-trial hearing is scheduled for April 2.

Photo Credit: Olivier Le Moal/Dreamstime.com

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Fist of Etiquette||

    Mayor Eugene Grant, named as a defendant in the lawsuit, tells the local NBC affiliate that "all of these dollars are necessary for us to provide efficient and effective services for the residents of Seat Pleasant."

    Surely in the town charter there's a special clause self-nullifying its own rules when the town needs money.

  • Karl Hungus||

    Who else misses the days when tarring and feathering was an actual thing?

  • AlmightyJB||

    I'm not opposed to bringing it back. Unfortunately freedom lovers are a minorty. Most people prefer to be slaves.

  • MSimon||

    "Most people prefer to be slaves."

    As long as the eats are regular.

  • Johnimo||

    Forget "tarring and feathering." I think the SOBs should suffer a more direct and permanent elimination from office. Where's Lee Harvey Oswald when he's really needed? Is he still inside the Texas Theater watching that movie: "War is Hell"?

  • ||

    No, still at the entrance of the first floor of the School Book Depository, where we left him.

  • hackajar||

    NAP

  • Finrod||

    Personally, I want the public pillory to make a comeback.

  • R. K. Phillips||

    Better yet, public pessary.

  • Rich||

    Mayor Eugene Grant, named as a defendant in the lawsuit, tells the local NBC affiliate that "all of these dollars are necessary for us to provide efficient and effective services for the residents of Seat Pleasant."

    "For example, just hiring defense attorneys in lawsuits against the town is a major expense."

  • shortviking||

    I can't get over Seat in the name. Is that pronounced like sitting in a seat? Or sate? Or some French bullshit like shay?

  • DenverJ||

    The "s" is silent.

  • AlmightyJB||

    You move the S from Seat to the end of Pleasant and make the L silent.

  • AlmightyJB||

  • Priscilla King||

    It's Seat Pleasant, as in what some Anglo-Catholic aristocrat thought would make a pleasant country seat. Maryland is just a tiny bit retro about these things; they still have jousting, too.

  • croaker||

    Not just jousting, they have an entire medieval militia.

  • AlmightyJB||

    Well evidently the residents of Seat Pleasant like being run by the mob.

  • tlapp||

    It is the "you didn't build it" mentality. The Mayor thinks government built it as opposed to the reality that the private sector built everything and funds the government.

  • DenverJ||

    Maryland City Raises Property Tax on Businesses by 800 Percent, in Bid to Attract More Businesses

    Brilliant!

  • AlmightyJB||

    They want to attract the "right kind" of business. Not discount stores and Chinese restaurants. First they have to railroad the people in the way. Then the hipsters will come.

  • BYODB||

    I suspect the guy is 100% on point when he notes that this is essentially a land-grab attempt. The city doesn't think it'll win on the eminent domain issue (or can't/won't play that card) so they want to make the property tax impossible to pay and get it for a steal.

  • JFree||

    This^. And no doubt like every property tax, there are exemptions/distortions/etc all over the place - so those large tracts of city-owned land nearby are themselves not having to carry that same taxload while they are dicking around with the property owner who does have to pay that taxload.

  • Palatki||

    Not far enough, JFree. City-owned property is Public Property - it's tax exempt. They pay zero taxes on the land, and when they steal those other two properties, they'll pay zero tax on those also.

  • DarrenM||

    I'd say that the owners of any business that thinks they won't be subject to the same treatment after the city runs these other businesses off are overly optimistic.

  • Agammamon||

    Its like the idiocy of internet scams - a good chunk of them are deliberately stupid enough that they only attract really stupid people.

    'Overly optimistic' is the best sort of business for a city. Do you know how much money a town can make in business licenses alone with all these morons constantly going broke?

  • JWatts||

    "I'd say that the owners of any business that thinks they won't be subject to the same treatment after the city runs these other businesses off are overly optimistic."

    The most likely "owners" will be the Mayor and his buddies. This incident could be a Dukes of Hazards episode about ridiculously transparent small town corruption.

  • Priscilla King||

    In their dreams they'll attract enough of anything to keep even the discount stores and Chinese restaurants afloat. Richies do not actually LIKE high taxes.

  • colorblindkid||

    From a WaPo article about this guy last year, this quote from him:

    "As with almost any politician, the ability to say you are the first at something is a hallmark of accomplishment, to show that African Americans can be at the cutting edge, that is tremendous."

    If Franco is white, I'd say the two businesses have pretty good merit to sue for racial discrimination. Who are the other businesses? Was it just a hand-picked few? Is there a pattern here?

  • Libertymike||

    Did you even need to look to learn that the guy was Afro-trash?

    Blacks are by far the most racist of all the races.

  • ||

    Koreans may have something to say about that.

  • R. K. Phillips||

    So you've never been to China, I can see.

  • ||

    "It is backward economic thinking. It's borderline racketeering," says Steven Franco, who owns and operates the Discount Mart and is one of the plaintiffs in the suit.

    In the name of the libertarian cause, can we get someone to ask Mr. Franco to pen 100 words or so distinguishing this from racketeering? I wanna see if he reaches the "Well, I guess it's really no different from racketeering." conclusion or tortures himself to preserve some honest notion of the people who are extorting him out of business.

  • esteve7||

    "The tax was supposed to bring in about $252,864 a year"

    You mean 'Steal'. That's the word you were looking for, right?

  • esteve7||

    I may not agree with Shapiro on everything, but he is dead right about the need to argue morally and not efficiency. Example - Socialism isn't bad because it's inefficient, it's bad because it is evil.

    Same here, it's not bad because it will drive businesses away, etc, it's bad because it's immoral. It is evil to use the state to force out a lawful business so your own fucking hipster places can move in. Literally everything in this article is immoral and corrupt from the politicians.

    Arguing over efficiency means it would be OK as long as it didn't actually chase businesses out. The opposite is true - this is immoral and would still be bad even if it weren't inefficient.

  • Leo Kovalensky II||

    ^This

  • IceTrey||

    Exactly. Once they run out the current owners the land will be sold to cronies and the tax will be repealed.

  • dchang0||

    You're referring to Ben Shapiro, right?

    Yeah, he has evolved a surprisingly libertarian stance on several issues over the years.

    There are a couple of un-libertarian (socially conservative) positions he'll probably never let go of due to deeply-held religious beliefs and traditions, but he's out there making great libertarian arguments to self-described conservatives and even publicly acknowledging they are libertarian arguments. Same with Charles C. W. Cooke (a "conservatarian") and Kevin D. Williamson, who both would argue vehemently and deftly against this stupid illegal taking, also on moral grounds and also on practical grounds.

  • ||

    Being against abortion can be a libertarian stance...

  • Jimoxe||

    Better check with the fetus first.

  • Jimoxe||

    My bad.
    Didn't read your comment right.

  • dchang0||

    True. The pro-life libertarians and pro-abortion libertarians are basically taking opposite sides of the instant the new life begins in the womb.

    What I don't like about how Ben Shapiro justifies his anti-abortion stance is that it boils down to "it's a new life starting at conception because I and my religious tradition say so, and that's that," even though no one can actually prove that life begins at conception.

  • Fk_Censorship||

    The libertarian divide on abortion has nothing to do with the science behind when life begins. It seems to reconcile two scenarios of initiation of aggression - on one hand, the mother wanting to take the life of the fetus away, on the other, the fetus requesting free room and board for 9 (or fewer) months despite not being wanted. Whose aggression of the NAP is worse? Was there an implicit contract between the mother and the u conceived fetus, when she had sex, that she would keep the pregnancy to term, should her egg get fertilized? That's what the debate is about.

  • operagost||

    No, it's not. It's not the tiny human's fault the mother made a mistake. We fully developed humans have to take responsibility for our actions. An angst-filled preteen could explain it to you! "I DIDN'T ASK TO BE BORN!"

  • I'm Not Sure||

    "Mayor Eugene Grant, named as a defendant in the lawsuit, tells the local NBC affiliate that "all of these dollars are necessary for us to provide efficient and effective services for the residents of Seat Pleasant.""

    So raising taxes on residents to pay for the necessary services provided is out of the question, then?

  • RoyMo||

    It isn't raised on residents, it is raised on five individual specificlly chosen businesses.

    Maryland has been a godforsaken place since Coode's Rebellion, so I know little of its "laws", but in most jurisdictions you can't choose to only tax certain individuals just as you can't enforce a bill of attainder. That is why these were imposed under the cover of an "improvement district", something Reason's writers should look into in general.

  • Fk_Censorship||

    They're also trying to increase the penalty for texting and driving from $75 to $500 for the first offense. It's all over the local news.

  • JoeBlow123||

    "Grant is a controversial politician, who held court for several months in a tent outside the Seat Pleasant City Hall after the city council voted to bar him from the building because of alleged hostile behavior toward city staff."

    Lol. What a weirdo. Perfect for city government!

  • Mark22||

    The racial makeup of the city was 2.01% White, 96.72% African American

    What is it about African American culture that they tolerate this crap? European Americans (and Europeans) would have the mayor's head on a pike in front of city hall within an hour.

  • Agammamon||

    Not Europeans - not the ones that are part of the EU which is exactly this sort of government on a continental scale.

    The are the people who (leaving the immigration issue aside for now) have allowed their own governments to literally implement a de facto separate legal regime for their Muslim refugees.

  • Mark22||

    Europeans only remain peaceful as long as the middle class remains reasonably well off; they get really nasty when their governments stop delivering the goods.

  • Earth Skeptic||

    Sounds like justification for forced bussing.

  • CptNerd||

    There's a reason folks here in the DC area call it "The People's Republic of Maryland". At least Aunt Virginia doesn't try to take your money quite as much. Funny thing though, I've owed Virginia almost exactly my Federal refund every year...

  • Agammamon||

    Mayor Eugene Grant, named as a defendant in the lawsuit, tells the local NBC affiliate that "all of these dollars are necessary for us to provide efficient and effective services for the residents of Seat Pleasant."

    Hmm, if it costs this much for services, maybe those residents would like to see some competing bids? Or maybe even get a look at your own bid - which no one except you has seen so far.

  • dchang0||

    $55,000 and $31,180 will buy a lot of woodchippers...

  • Pat001||

    It's Maryland - bluest of the blue states. How a Republican governor got elected there is still a mystery.

  • Juice||

    The Democrat running was almost as hated as Hillary.

  • Fk_Censorship||

    The highland areas toward West Virginia are good ole' boy country (although not too densely populated), and I saw a whole lot of Trump signs and almost no Hillary signs in the tobacco growing lowlands between the cheaper bay and the ocean. On the other hand, the suburbs of DC, as well as Baltimore, are basically Belarus when it comes to political orientation. Annapolis is mixed due to the large military presence.

  • Miter Broller||

    Russian bots, duh!

  • ||

    We all know they want to kick them out in the most passive aggressive manner in order to attract OTHER businesses, by their vacancy. Any half brained business would say hell no to that shit.

  • 10percenter||

    There is a city near me doing a similar thing via liquor license fees rather than straight up tax increases. They increased fees from a couple thousand dollars a year to 100k in one year with a narrowly defined ordinance that only affected certain nightclubs. They said it was to recoup policing costs due to increased crime in one part of town. Sure they were night clubs frequented by minorities and there was no evidence of increased crime, but that does not matter. What matters is shutting down "undesirable" businesses so they can attract new, higher class establishments.

  • dchang0||

    Would these "higher class establishments" happen to be giving more generous campaign contributions (or far more illegal contributions) to the politicians in power? (Almost certainly.)

  • NoVaNick||

    Rule #1-if you want better tenants, raise the rent. Same thing at work here. Then property values will rise once the Walmart shoppers are replaced by the Whole Foods Subaru-driving crowd, and they will bring more tax revenue with them (and drive out the brown-skins)...

  • Priscilla King||

    Except that Whole Foods is closer to a Metro station in a nicer neighborhood, and Prince Georges County has tried this sort of thing before and demonstrated time after time that richies will continue to stay in Northwest D.C. over even Metro-accessible Hyattsville.

    (Fair disclosure: While living in Maryland I learned to shop in Hyattsville, Laurel, Bowie, even low-down Bladensburg...but Seat Pleasant? What's there? I never heard that that neighborhood had any attractions.)

    Richies don't get to know people easily. Richies do not see a difference between the population of Seat Pleasant and the population of Southeast D.C. Most richies, even if Black, are terrified of either crowd.

  • Cloudbuster||

    Moar woodchippers.

  • Johnniebgoode||

    I fully support this.

    Because it proves not all the idiots live in California.

  • tlapp||

    Seat Pleasant is a decaying suburb of Washington DC. This should run off the last of any businesses in the small town. No reason for any of them not to move literally less than a mile and avoid the tax.

  • Priscilla King||

    Or, as prices skyrocket to offset taxes, for shoppers not to patronize businesses that are (among other things) more Metro-accessible.

  • jm15xy||

    More details at the Washington Post.

    I think the tax is a scheme to seize the properties without having to pay compensation.

  • Priscilla King||

    Too right.

  • Priscilla King||

    Or: Having failed to self-destruct by population bloat, at least one town in Prince Georges County resolves to self-destruct by driving out all businesses.

    This is the same P.G. County in which my house was sold, by someone who'd never had a claim to it or even been a guest in it, and the sale "to a good faith purchaser" was upheld...because my husband had bought the house for $75K (more than it was worth) and "good faith purchaser" had pledged to pay $225K.

    We had observed, while living there, that P.G. County is populated mostly by people who weren't born there and are saving up money to move away from there. Those willing to commit time to its government tend to be, consequently, dregs.

  • Mudhen||

    Never underestimate the greed of Politicians. Their desire for taxpayers money is never satiated.

  • R. K. Phillips||

    It's actually about power, as is rape.

  • operagost||

    The only reason government thugs get away with this is because there aren't many homicidal maniacs like Andre Kehoe or Marvin Heemeyer. They know the average person is peaceful and cooperative.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online