Class Warfare comes to Maryland

Hat tip to Maryland Law.

I have mixed feelings about a Maryland Senate bill aimed at taxing excessive executive pay. As a progressive, I do find most executive bonuses to be excessive, and I agree that something should be done to curb them. But I also fear that this bill will hurt Maryland's economic interests because it is a state based bill.

Senator Paul G. Pinsky weighs in on the necessity of the bill:

“At the end of the day, they have to pay taxes on their profits. There are no limits on their ability to write off compensation packages. So if one company has an executive who’s paid $300,000, and another $15 million, that $15 million is considered a legitimate business expense, and I think it’s not,” Pinsky said. “When you get a corporate write-off for that, it transfers the tax burden to middle- and working-class people. I think we’re losing money.”

I am inclined to agree, these bonuses should not be tax deductible. In fact, I am inclined to agree with the whole bill and its proposed implementation. My problem is, if CEO's only have the follow the rules in Maryland, what will stop them from picking up shop and heading out of state? Not too much.

A bill like this needs to be passed nationally, and unlike some other issues, where it is beneficial for states to take the lead, that seems not to be the case here. Maryland should not handicap itself with the good-intentioned, economically populist legislation until we are sure that it will not adversely harm our working class population with loss of jobs or revenue. Otherwise, we could be placing ourselves at a serious economic disadvantage in the future.

State Legislators Draft Several Bills Aimed at Ending the Ground Rent System in Maryland

Wow, ask and you shall receive, eh? (hat tip to The Baltimore Sun for their solid coverage of this issue)

Several state legislators said yesterday that they are drafting legislation to change Maryland's arcane ground rent system, including bills to prevent homes from being seized over missed rent payments and to ban the creation of new land leases.

"We're just going to do what we did with flipping and other scams. We're going to get rid of it," said Del. Maggie L. McIntosh, a Baltimore Democrat who is chairwoman of the House Environmental Matters Committee, which handles matters of real property and housing. "We're going to stop it right where it began."

Wonderful news, I must say. Doug Gansler weighs in:

"It clearly wasn't intended for the owners of the ground rent to get hundreds of thousands of dollars of improved property," state Attorney General-elect Douglas F. Gansler said yesterday. "That's what people are finding outrageous."

The system has "outlived its usefulness," Gansler said.

I would say the system was useless from the start; an congenital colonial disease, besmirching the Old Line State. How the legislation against ground rent exploitation will take shape is not yet clear. Several bills are in the works at the State level.

One bill would eliminate new ground rents. Another would protect people who fall behind in their ground rent from losing their house. A third would assure that people receive information about the system when they close on the purchase of a home. This might require a new registry to make sure ground rent holders and their tenants can locate one another, McIntosh said.

I would like to see a combination of the first and the second. The system needs to be killed, and by eliminating new ground rents, that process can begin. Protection of the homeowner's property is also important.

"[State Senator, Brian E. Frosch] said the legislature must prevent ground rent owners from keeping all proceeds from selling the houses that they seize. No other private debt collectors can reap such windfalls. In a foreclosure, for example, the mortgage company gets to keep only the amount it is owed.

"It's especially outrageous that someone can come in and take the property, and they don't pay [the homeowner] the surplus" after its sale, Frosh said. "It's ridiculous."

And finally:

Sen. Delores G. Kelley, a Baltimore County Democrat, said she would introduce legislation that, among other things, would reduce the fees that ground rent owners can charge homeowners if rent isn't paid on time or if a lawsuit is filed. Currently, ground rent owners can pass on up to $500 in costs of collecting overdue rent before a suit is filed and then up to $700 in attorneys' fees, $300 in title fees and all other court costs once a suit is filed.

George W. Della Jr., who failed to pass a similar bill in 2003, has the last word in the Sun article:

Goldberg, the ground rent owners' spokesman, said recently that he thought the fees should be raised because many expenses have increased.

"For that gentleman to say the fees are not high enough ... give me a break," Della said.

Good work by The SUN in making this issue an important one this year, and good work by the State Legislature for responding. Lets hope they can give anyone who owns or hopes to someday own a home in Baltimore City, a much needed break by getting rid of the predatory ground rent system.

UPDATE: Story today from The Sun about one family's fight to save their Canton home from an ejectment.

UPDATE 2: For a comprehensive look at ground rent in Maryland, check out The Sun's Ground Rent Series.