By Patrick McGrady
Special to The Dagger
Executive Summary: There are lots of taxes in Maryland, but as of today we don’t tax many services. The big spenders in Annapolis are obligated to fill a big budget deficit by next Spring, and they see taxing “services” as a way to achieve this. This means that Marylanders will pay 6% more for most everything we pay for — from haircuts to cellphone service. The Special Session of 2011 convening this October to address redistricting will likely include these tax increases.
In Maryland, we have lots of taxes.
Listing the big ones, we have:
– Real Estate Property Tax (Tax on Real property owned by individuals or corporations, rate varies)
– Personal Property Tax (for property of corporations)
– Personal Income Tax (2% to 6.25% of income, plus County income taxes)
– Corporate Income Tax (8.25% of “taxable corporate income)
– Flush Tax (Chesapeake Bay Restoration Fund Tax ($30.00 per year)
– Alcohol Tax (9% of price of alcohol products)
– Tobacco Tax ($2.00 per pack of cigarettes or 15% of other products plus regular sales tax)
– Gas tax (23.5 cents per gallon)
And these are just the Maryland-levied taxes. There are more federal taxes on personal income, corporate income, alcohol, tobacco, fuel, and don’t forget, the 2% tax on medical devices from President Obama’s Health Care Law.
But I digress– As you perused the tax information above, you surely noticed that the big tax that is missing from the list is the Maryland Sales and Use Tax of 6%.
Every time you buy a product in Maryland, the business you buy it from is required to collect the 6% Maryland Sales Tax from you, and then later remit it to the State government.
When you buy things from other states in person, over the phone, mail, or Internet the business doesn’t have to collect the Maryland Sales tax, but you (the buyer) are required by law to file the “use tax” according to the reporting schedule. According to the Maryland Comptroller’s Website, the reason given is as follows:
“Maryland’s use tax protects Maryland businesses from unfair competition. Local businesses would be at a competitive disadvantage if consumers were entitled to a 6 percent discount on items purchased from out of state businesses.”
When you visit Pennsylvania, Delaware, or Virginia and buy a new TV or shoes, you are responsible for paying the Maryland Sales and Use Tax when you bring it home to Maryland. Everybody files those taxes, right? You are required to do this, but enforcement is tilted toward high-dollar items like boats and automobiles.
Some things in Maryland are exempt from the Sales and use tax, including medicine, food purchased from a grocer for later consumption (but not food that is ready-to-eat), purchases made for resale, and newspapers.
A few services are also taxed under the authority of the Sales and Use Tax. In Maryland, janitorial services and security services are subject to the sales tax, but we don’t tax many other services — yet.
Back in the infamous O’Malley Special Session of 2007 (see last week’s post, here), O’Malley and the Democrats raised the sales tax to 6% from 5% in addition to the later-repealed tax on computer services.
But the Sales tax hasn’t been producing the level of revenue that Maryland needs to feed the addiction to spending that is pervasive in Annapolis (and DC, but that’s a different topic altogether).
Because the Maryland State government spends more than it brings in every year, it is always looking for new sources of revenue. The nearby chart shows the difference in the velocity of government spending increases and the increase in Sales Tax Revenue. From 2000-2012, the Sales and Use Tax collections have increased by ~52%, while the total budget has increased by ~91% over the same period.
So what option does a statist have, but to look for new “revenue” sources? Clearly, any cuts would put the well-being of women, old folks, and adorable puppies at risk.
And so House of Delegates Speaker Mike Busch, Senate President Mike Miller, and Governor O’Malley are looking at ways to collect more money any way they can.
Even while O’Malley goes on television to talk about “jobs” (http://abcnews.go.com/ThisWeek/video/interview-gov-martin-omalley-sen-jeff-14249492) he is looking at expanding the job-killing 6% sales tax to such things as cell phone service, car repairs, cable tv service, taxi service, barber and hair salons, and tax preparation.
A couple weeks ago, members of the House and Senate were briefed on the revenue that could be raised by taxing these services that we all use. Here’s a story about that if you want to know more: http://www.boston.com/business/taxes/articles/2011/07/27/md_analysts_present_sales_tax_extension_options/
Can I take a moment and reflect on the 2010 election? Of course I can. Back in September 2010, Bob Ehrlich accused O’Malley of planning to expand the sales tax to these services in 2011. His response: “I think that’s part of the politics of fear and division. It’s the sort of scaremonger politics that some folks choose to practice.” http://www.washingtonpost.com/wp-dyn/content/article/2010/04/09/AR2010040905046.html
Now I don’t mean to say that Bob Ehrlich would have been able to stop these tax increases, but he ran on the accusation that O’Malley would raise taxes, and that he would veto them. For the sake of the working folks in Maryland, I hope O’Malley keeps his word and doesn’t raise taxes.
My fear for the Special Session this October and the regular session of the General Assembly in January is that when the legislation to tax these services is proposed, the most organized of these occupations will be able to spend the money required to stop the taxes from hitting them, and the rest of them won’t. To clarify, I believe the accountants, lawyers, and engineers will be able to pay for lobbyists to save their own skin, while Maryland barbershops, cab drivers, car mechanics, and handymen will succumb to the wave of taxes. When you call your Senator and Delegate, tell them not only how it impacts YOU directly, but how these taxes will impact your neighbors, your co-workers, and your entire community.
It is important for us as the governed to consider what we expect from the State Government in Maryland. Do we want to be taken care of from cradle to grave? By letting government take from one group to give to another, is anybody really better off? How much freedom are you willing to give up?
Maryland has been able to spend more than is prudent for a long time because of Federal spending thanks to the proximity of Washington, DC, Fort Meade, and Aberdeen Proving Ground. We reap the benefits of the federal expenditures, but this means we are in a vulnerable position when we are spendthrift year after year.
No tax is guaranteed to pass. But these politicians need to fear for their political future in order to stop it. Will we stand together to stop tax increases, and demand spending cuts? Or will things continue as usual in Maryland?
Listen or watch the discussion with Patrick McGrady and Maynard Edwards live at 8 a.m. Wednesday on WAMD 970 AM. Or call the station to give your point of view at (410) 306-6270.
yep taxes are going up and the same people will be re-elected.
To the people who vote in tax and spend liberal politicians . . . what did you expect? Did you truly believe that O’Malley and thugs (Busch, Miller, and many of the other dems) would not continue to raise taxes. How stupid are you?
@Rob, you are so offensive in your delivery. Don’t call people stupid like you know everyhitng there is to know about politics, because you don’t. I can tell by the lack of substance in your posts that you are like 70+ years old, so set in your ways you couldn’t change if you wanted too even though you needed to 20 years ago. Nor could you hold an intelligent conversation. You just want to blame, blame, blame. Finger pointing is what got our society where it is today, screwed up by old grumpy bats like you.
ROB IN BEL AIR IS FULL OF HOT AR,
Dear ROB IN BEL AIR IS FULL OF HOT AIR,
You must make your parents proud. (Sarcasm). If ROB is 70+ years old (don’t know if he is and neither do you) maybe he has seen enough and heard enough (and paid more than his fair share of taxes) to give him the right to comment. This is Maryland and in Maryland we fully expect to be gouged and gouged hard by our political leaders. If I thought differently then I wouldn’t like being called stupid but the shoe would fit.
ROB, Please accept my apology on behalf of ROB IB BEL AIR IS STUPID.
I think a bigger fear should be the expansion of the Sales and Use Tax to cover gasoline purchases. Maryland currently taxes gas with a seperate tax that is calculated in the cost shown on the pump, but you don’t pay a sales tax on top of that. Even during the infamous special session of a completely Democratic controlled legislature, the votes weren’t there to increase the current gas tax by even half a cent, which is the primary source of funding for road construction and mass transit projects.
If they were to add gas in on the list of taxes you pay, the price you see on the pump wouldn’t increase, but you would be paying an extra 6% of additional government profit. They might even be “nice” and reduce the built in gas tax a few cents to make it look like they are balancing things out, with completely knowledge that they will be getting more money out of the whole thing.
I think this is a much more likely scenario personally because they have been looking for a way to increase transportation funding for a while now and haven’t been able to get any traction.
Chris! How did I leave topic from this post?
You are correct. That is a huge item on their agenda.
There are different ways they can increase the taxes on gasoline– almost so many as to warrant an additional piece, altogether.
They could add the sales tax to gasoline, or they could make the gas tax a percentage of a gallon of gas (versus a flat number of cents). They might also just jack up the flat rate we currently pay.
Since cars have become more fuel efficient AND because of the flat gas tax rate per gallon there are some issues with this means of funding. Better fuel economy means fewer gallons of gas purchased, so less money there. And unlike the sales tax which is calculated by multiplying the price by the tax rate, the flat rate doesn’t go up when the price of fuel does (and that rate hasn’t increased since the early ’90s) all the while road construction costs rise with inflation and the price of oil for asphalt work.
Not to mention, they like to balance the budget by hijacking dedicated highway money from fund to use on other things.
This is just a curiosity question, not an accusation toward any person/party…Pat you mention how the spending has increased by almost double than the increase in tax revenue. What is causing the increase in spending? Is it new programs and projects, or are the costs of things that have been funded gotten more expensive?
Good question LPShawn1–
Somebody asked this last week too. When we look at the data, we can weigh the increases against inflation.
Using the westegg calculator here: westegg.com/inflation
We can evaluate the value of a basket of goods and services over time. This “basket of goods and services” is used to calculate the CPI (consumer price index) over a long period of time. If we plug in $15B, we can see how much money worth of stuff that would buy in dollars going forward in time or backward.
If we plug in 2010 as the year for the calculation, we see that the same REAL level of spending today would be equal to $18,799,545,414.54. The Maryland budget from 2010 was ~$32B so we know that the level of spending grew much faster than the cost of goods. Over this period, spending grew by 79.3% and the cost of goods only increased by 25.3%.
The difference can be assigned to increased spending and new programs.
Further, don’t take my word for it. Look here:
http://dls.state.md.us/data/bud/bud_opebud/bud_opebud_buddat/State-Spending-by-Fund-Since-Fiscal-1979.pdf
And here: http://dls.state.md.us/data/bud/bud_opebud/bud_opebud_buddat/Budget-Growth.pdf
Except that the CPI does not account for the increased cost of medical, benefits and post-employmnet benefits. It also does not account for increasd demand for services because the CPI looks at consumer goods not govt services. this proves that you are a complete tea bagging idiot. No surprise here…
Coming from a homophobic moron, I’m sure he’s sooo insulted.
Phil:
I guess when you’re out of intellegent arguments you revert to name calling! A four year old will do the same thing but, we can eventually teach him better manners.
TAXED,
And just as soon as we can get Phil re-admitted to kindergarten we will again take up the daunting task of teaching him manners. Alas, he has a long history of failing to make enough social progress toward being allowed to live indoors with the family.
Know this, whatever your political persuasion, the special session is coming. Yesterday Franchot said it was not a good idea to raise taxes. O’Malley said a lot that meant nothing. So, what’s going to happen? Taxes and/or tolls and/or fees are going to go up, my friends. Up, up, up. This is Maryland. We have a proud history of raising the amount that citizens pay to their government. Sometimes we call it taxes, sometimes user fees, sometimes tolls. Nevertheless, up they go!