I can’t remember a raising of taxes in my recent adult memory, which has spanned about half a decade, so watching what comes of Maryland Governor O’Malley’s attempt to raise Maryland taxes is going to be entertaining for me on a number of levels. First, it’ll affect me in an appreciable way since I live in Maryland so I can analyze it. Second, since I’m more engaged in the political process, it’ll be interesting to see what sort of political fall out will come of this. Third, it’s just fun when something this basic, taxes, gets played with in the political arena.
While the details are still trickling out… here’s what has been brought up in a bunch of news sources…
Currently Maryland has a flat tax of 4.75%, thanks to a 1997 law, but O’Malley has been talking about making the tax progressive (meaning it would have brackets, like the federal income tax). It’s unclear who would have to pay more in the new system, since the details haven’t been released, but anywhere from $150k to $200k household income would be the turning point. The progressive tax wouldn’t be a real killer for those with high incomes anyway (even if the nominal value is larger). Also, this is a bad thing for small businesses that pass through earnings to their owners, like mine, and might make some move to another state. (I’ve been considering it)
Sales Tax Increase from 5% to 6%
O’Malley is coupling a sales tax increase with a property tax decease (not yet explained) which shifts a the tax burden a little bit. Since non-Maryland residents spend money in Maryland and non-Maryland residents don’t pay property taxes, by decreasing property tax and increasing sales tax, you’re pushing some of the burden onto visitors (strictly speaking in theory). Now, this also has the negative effect of shifting the burden from the affluent (more expensive houses) onto the less affluent (less expensive houses). This shift from affluent to less affluent is lessened by the fact that Maryland doesn’t tax food, so it’s not as bad as some people are screaming.
Also, O’Malley wanted to extend the sales tax to include a bunch of other things like health club memberships, tanning salons, spa services, and real estate management services. Clearly those businesses are pissed… plus they’re going to be taxed more!
Property Tax Decrease
Cutting 3 cents per $100 in assessed value over the course of three years, or .03% over three years. My honest opinion? A waste of time. I’d save around $50 a year, big whoopee.
Raising Corporate Tax
O’Malley is looking to increase the tax from 7% to 8%, which is estimated to dump around 2,000 jobs in the area. That’s what happens when you immediately increases expenses… jobs get cut in the short term.
Excise and Excise-ish Taxes
Double the cigarette tax and increase the car titling tax are two more pieces of the puzzle.