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Judge Overturns Maryland’s Wal-Mart Tax

1 min readBy: Chris Atkins

Yesterday, a federal trial judge ruled that Maryland’s “Wal-Mart TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ” violated federal law on the regulation of employee benefit plans. The Maryland General Assembly approved the tax in January, 2006, over the veto of Governor Ehrlich.

The Maryland law required that any employer in Maryland with more than 10,000 employees had to spend at least 8 percent of its total wages on health insurance for employees. If it does not meet this statutory threshold, it has to pay the difference into the Maryland Fair Share Health Fund–effectively levying a special tax on those Maryland employers (i.e. Wal-Mart, the only Maryland employer impacted by the bill) that do not spend “enough” on health care for their employees.

In addition to levying an onerous burden on a single employer, a federal judge yesterday ruled that the law also violates federal law. The Employment Retirement Security Act (ERISA) preempts most state regulation of employee benefit plans, especially those plans that are self-insured by the employer. The judge yesterday ruled that Maryland’s Wal-Mart tax fits within the category of state regulations preempted by ERISA itself.

Even if appellate courts reverse the trial judge’s ruling on ERISA, the Maryland Wal-Mart tax still violates the principles of sound tax policy. For our analysis of Maryland’s law, please click here.