Inversions have been in the news consistently this summer as multiple companies have looked for legal paths away from the U.S. corporate tax system. Burger King became the latest corporation to add to the list after they...
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Maryland Governor O'Malley Says State Has Third Lowest Taxes in the Country!
Yesterday, Maryland Governor Martin O’Malley tweeted that “Maryland has the 3rd lowest taxes as a share of income,” prompting responses from Maryland residents questioning the claim. We weren’t able to find a source for the claim with any of the usual rankings and reports out there, so we followed up with state officials and they pointed us to a table “State and Local Own-Source General Revenue as a Share of Personal Income” in a March 2012 article in State Policy Reports (subscription required).
A couple of things jump out at us as problematic.
First, “own-source revenue” includes a lot of things that no one considers taxes, like college tuition, interest on state investment funds, and criminal fines. We’re the first to say Maryland has high taxes but it’s not right to include UMD tuition payments in that total, as the Governor’s statistic apparently does. It’s not a measure of taxes.
More to the point, it’s perhaps the only way you can juggle the numbers to make Maryland a low-tax state. If you look at state revenue per capita, they’re 22nd highest. If you look at state tax collections per capita, they’re 13th highest. If you look at state income tax collections per capita, they’re 10th highest. And if you include local income taxes, they’re 2nd highest in income tax collections per capita.
There’s also a big difference between tax collections and tax burdens. Tax collections are what are received by the state; tax burdens are what are paid by state residents. The best example of this is in Alaska, a state that collects billions of dollars in oil revenue. Using O’Malley’s metric, Alaskans are the highest taxed people in America. Alaskans are quite happy with this, however, because they pay none of those taxes: all the rest of us who use Alaskan oil do. They are a low tax state.
Maryland, on the other hand, is not. After accounting for these cross-border effects of taxes, which we do in our annual State-Local Tax Burdens report, Maryland actually ranks 12th highest in the country for tax burdens as a percentage of personal income.
More on Maryland here.
Follow Scott Drenkard on Twitter @ScottDrenkard.
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