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| Maryland House Democrats want residents to pay sales tax on services | Maryland House Democrats want residents to pay sales tax on services |
| (about 3 hours later) | |
| Searching for a way to pay for an expensive public education overhaul, Maryland House Democrats want to cut the state sales tax rate by one percentage point and expand the tax to professional services, including visits to the accountant or the beautician, which are currently exempt. | Searching for a way to pay for an expensive public education overhaul, Maryland House Democrats want to cut the state sales tax rate by one percentage point and expand the tax to professional services, including visits to the accountant or the beautician, which are currently exempt. |
| “Maryland’s sales tax is antiquated,” Majority Leader Eric G. Luedtke (D-Montgomery) said “We tax goods and not services, and the economy is on services.” | “Maryland’s sales tax is antiquated,” Majority Leader Eric G. Luedtke (D-Montgomery) said “We tax goods and not services, and the economy is on services.” |
| Luedtke said House Democratic leaders will formally introduce legislation on Thursday that would broaden the sales tax but also cut the rate from 6 percent to 5 percent, lower than neighboring Virginia and Pennsylvania. The tax would not apply to education services, health care or services provided by nonprofit or civic organizations. | Luedtke said House Democratic leaders will formally introduce legislation on Thursday that would broaden the sales tax but also cut the rate from 6 percent to 5 percent, lower than neighboring Virginia and Pennsylvania. The tax would not apply to education services, health care or services provided by nonprofit or civic organizations. |
| It was unclear on Wednesday how the House bill would be received in the Senate. Neither Senate Budget and Taxation Chairman Guy J. Guzzone (D-Howard) nor a spokesman for Senate President Bill Ferguson (D-Baltimore City) returned calls seeking comment. | It was unclear on Wednesday how the House bill would be received in the Senate. Neither Senate Budget and Taxation Chairman Guy J. Guzzone (D-Howard) nor a spokesman for Senate President Bill Ferguson (D-Baltimore City) returned calls seeking comment. |
| House Minority Leader Nicholaus R. Kipke (R-Anne Arundel) said the proposal will hurt businesses and force more retirees to flee the state. | House Minority Leader Nicholaus R. Kipke (R-Anne Arundel) said the proposal will hurt businesses and force more retirees to flee the state. |
| “It looks like it’s a 50 percent increase in the sales tax,” Kipke said. “That needs to be understood in the context that Maryland is one of the highest tax states in the country . . . It’s a very dangerous and harmful measure for our economy.” | “It looks like it’s a 50 percent increase in the sales tax,” Kipke said. “That needs to be understood in the context that Maryland is one of the highest tax states in the country . . . It’s a very dangerous and harmful measure for our economy.” |
| Discontent over taxes paved the way for Gov. Larry Hogan’s surprise win against then-Lt. Gov. Anthony G. Brown (D) in 2014. Hogan, a Republican, was considered a long shot in a state where Democrats outnumber Republicans by 2 to 1. He has railed against the cost of Democrats’ education plan in recent months, saying it will necessitate tax increases Maryland residents cannot afford. | Discontent over taxes paved the way for Gov. Larry Hogan’s surprise win against then-Lt. Gov. Anthony G. Brown (D) in 2014. Hogan, a Republican, was considered a long shot in a state where Democrats outnumber Republicans by 2 to 1. He has railed against the cost of Democrats’ education plan in recent months, saying it will necessitate tax increases Maryland residents cannot afford. |
| “The last time Maryland saw massive tax hikes like this, they wrecked our economy,” Hogan spokesman Mike Ricci said Wednesday night. “Governor Hogan was elected — and overwhelmingly reelected — to hold the line on taxes, and that is exactly what he is going to continue doing.” | |
| An August report on state revenue described the growth of Maryland’s sales and use tax, which is estimated to bring in $5.2 billion for fiscal 2021, as “generally weak” and recommended broadening it to include services. | An August report on state revenue described the growth of Maryland’s sales and use tax, which is estimated to bring in $5.2 billion for fiscal 2021, as “generally weak” and recommended broadening it to include services. |
| “The shrinking tax base increases the volatility of [sales and use tax] revenue to the business cycle,” the report says. “In times of economic stress, consumers are better able to delay or forego consuming goods than services. The impact of these structural problems will only continue to increase with time.” | “The shrinking tax base increases the volatility of [sales and use tax] revenue to the business cycle,” the report says. “In times of economic stress, consumers are better able to delay or forego consuming goods than services. The impact of these structural problems will only continue to increase with time.” |
| Last year, the state passed legislation to collect taxes on “marketplace facilitators” — businesses, such as Poshmark and Amazon, which enter into contracts with third parties to sell goods on the platforms. But Andrew Schaufele, the director of the Bureau of Revenue Estimates, said the state’s sales tax code has not been substantially modified since World War II. | Last year, the state passed legislation to collect taxes on “marketplace facilitators” — businesses, such as Poshmark and Amazon, which enter into contracts with third parties to sell goods on the platforms. But Andrew Schaufele, the director of the Bureau of Revenue Estimates, said the state’s sales tax code has not been substantially modified since World War II. |
| “Think about how much the world has changed,” Schaufele said. “We’re still behind if we’re not taxing services.” | “Think about how much the world has changed,” Schaufele said. “We’re still behind if we’re not taxing services.” |
| Luedtke said legislative analysts estimate that taxing services would raise about $2.6 billion by fiscal 2025, enough to pay the balance needed for a landmark education bill that calls for expanding prekindergarten for three- and four-year-olds, increased teacher salaries, grants for schools with a high percentage of students from poor families and increased spending for special education. | Luedtke said legislative analysts estimate that taxing services would raise about $2.6 billion by fiscal 2025, enough to pay the balance needed for a landmark education bill that calls for expanding prekindergarten for three- and four-year-olds, increased teacher salaries, grants for schools with a high percentage of students from poor families and increased spending for special education. |
| Because wealthier residents are believed to spend more on professional services, the change would make the state’s tax code less regressive, Luedtke said, shifting a greater burden to the affluent. | Because wealthier residents are believed to spend more on professional services, the change would make the state’s tax code less regressive, Luedtke said, shifting a greater burden to the affluent. |
| He said that the change “would be a wash” for working-class residents. For residents who make the state’s median income of $84,000, the estimate is an increase of $3 a week in taxes, he said. | He said that the change “would be a wash” for working-class residents. For residents who make the state’s median income of $84,000, the estimate is an increase of $3 a week in taxes, he said. |
| “A cup of coffee at Starbucks would pay for us to get the best schools in the world,” he said. | “A cup of coffee at Starbucks would pay for us to get the best schools in the world,” he said. |
| Students failing, teachers fleeing: In Md., calls for sweeping — and expensive — education reform | Students failing, teachers fleeing: In Md., calls for sweeping — and expensive — education reform |
| In Maryland, discontent with taxes, economy paved way for Hogan’s victory | In Maryland, discontent with taxes, economy paved way for Hogan’s victory |
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