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Maryland Tax Debate Continues

1 min readBy: Alicia Hansen

Maryland Gov. Martin O’Malley’s recent 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. proposal is currently the subject of heated debate in a special session at the state legislature. From the Washington Post:

Maryland Gov. Martin O’Malley‘s plan to close an expected budget shortfall evoked passionate responses from constituencies from across the state yesterday, underscoring the challenge lawmakers face in reaching consensus as they move into the fifth day of a special session.

Legislators heard a stream of testimony from lobbyists, local officials and citizens on 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. and overhauling the personal income tax structure, two of the more controversial measures introduced by O’Malley (D) to eliminate a projected deficit of at least $1.5 billion.

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In a hearing on O’Malley’s income tax proposal — which would raise taxes on the state’s wealthiest residents while providing a modest break for others — Montgomery County figured prominently. The governor’s plan would affect the state’s largest and most affluent county more than any other jurisdiction.

In testimony before lawmakers yesterday, Montgomery County Executive Isiah Leggett (D) said O’Malley’s proposed top tax rate of 6.5 percent is too high. Leggett, who is pushing an alternative plan with a top rate of 5.5 percent, said Montgomery‘s tax burden would be greater than Virginia‘s and the District’s under the plan.

Karen Syrylo, a state taxation consultant and a member of the Maryland Chamber of Commerce, said that O’Malley’s proposal has led some business owners to voice a desire to relocate to Northern Virginia.

For an analysis of the governor’s proposal, see Tax Foundation Fiscal Fact No. 109, Governor O’Malley’s Tax Plan Puts Maryland at Risk in Regional Tax Competition. Click here for more on Maryland’s tax system.