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Maryland Revenue Falls Short Despite (or Because of?) Huge Tax Hikes

1 min readBy: Joseph Bishop-Henchman

We’ve reported exhaustively on Maryland’s self-destructive decision to raise essentially every state tax. Previously, the state Comptroller’s office had estimated that adding higher state income 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. brackets would raise $504 million in Fiscal Year 2009; increasing the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. by one percentage point would add an additional $377 million; and the $1 hike in cigarette taxes would net an additional $74 million. All told, the state was expected $976 million more for its budget.

Wrong, wrong, and wrong. Newly revised estimates issued by the Comptroller’s office put the income tax revenue increase at $369 million (36% short), the sales tax increase at $112 million (70% short), and the cigarette tax increase at $57 million (23% short). Instead of $976 million, the tax hikes are now estimated to bring in only $544 million, a 44% shortfall.

An op-ed in the Baltimore Sun has some insight:

The only factor keeping the state economy afloat is our geographical position next to Washington, D.C.

Economic history has shown that if you raise taxes, you do increase revenue for a time – but you stifle economic growth.

More on Maryland here.