Maryland Soon to Roll Out the Rain Tax

June 20, 2013

In just a few weeks, Maryland’s new “rain tax” will take effect. In April, Governor Martin O’Malley signed a new law that enacted a “storm water management fee” on ten of 24 local jurisdictions within the state. The bill was passed in response to a decree by the Environmental Protection Agency (EPA) formally known as the Chesapeake Bay Total Maximum Daily Load, which identified mandatory reductions in nitrogen, phosphorus, and sediment that damage the Chesapeake Bay. These pollutants are primarily found in drainage run-off and fertilizers.

Maryland, New York, Pennsylvania, Virginia, West Virginia and the District of Columbia must comply with these new environmental standards, but each state is free to find its own way to fund the relief efforts. Maryland is the only state that has instituted a levy to meet the EPA’s standards.

While a “tax” is a charge levied with the purpose of generating revenue, a “fee” is a charge levied for the purpose of recovering costs incurred in providing a service to the payer. So while the legislature as taken to calling this levy a fee, it is rightly categorized as a tax, because the revenue goes toward drainage systems, which everyone in the general public benefits from—not just payers of the levy.

What’s more, the tax is convoluted and disorganized.  It is levied annually on the amount of “impervious surface” that is on a property. According to Maryland’s state legislature, an impervious surface includes any area that prevents drainage from being absorbed into the ground. This means any roofing, driveways, or parking lots are subject to this tax. The thought was the more covered area, the more you pay.

An interesting twist here is that the ten local jurisdictions that will levy the tax have been given total autonomy on deciding rates. Several local legislators have used this as an opportunity to push back against it, including Laura Neuman, the Anne Arundel County executive, who vetoed her county’s legislation that would have charged an additional $85 on single-family homes, $34 on condos, and $170 on rural houses (her veto has since been overridden). Frederick County chose to send a message to the state government by charging just a penny for the storm water management fee. Carroll County is now the only county yet to take action (a comprehensive list found here). It is unclear if Carroll County plans a protest, but Carroll County commissioners have openly stated their discontent for the tax. Carroll County has until July 1, to enact this legislation or face state sanctions.

More on fees here.

More on Maryland here.

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