Maryland Puts Final Touch on Historic Tax Hike

April 9, 2008

Today Maryland Governor O’Malley signed into law the final piece of the state’s major tax overhaul, an eighth tax rate and bracket on personal income. A new Tax Foundation Fiscal Fact, “Maryland Flouts Regional Tax Competition with Historic Tax Hike,” by Bill Ahern provides a quick analysis of the tax hike and points out that middle-income taxpayers in Maryland were and still are paying higher income taxes than in any border state.

In only five U.S. states—California, Hawaii, Iowa, Maine and Oregon—could a couple with $75,000 in taxable income be in a higher tax bracket than an average Maryland couple. The Maryland rate for middle-income workers is about 7.5 percent (4.75% state plus 2.73% local).

Excerpt from the new Fiscal Fact:

Governor O’Malley has now put the icing on his first term’s biggest cake, a historic tax hike. We see no record of any state having raised all three of its major tax rates in one fell swoop, but Maryland has done just that.

The icing is a so-called millionaire’s tax, a 6.25 percent rate on income over $1 million, which on top of the local income tax will bring the rate on most Maryland income over $1 million to about 9.45 percent. All the other tax hikes on personal income, general sales and corporate income were set in law during the fall’s special session.

Click here to read the Fiscal Fact. Click here for the news release. Click here for more on Maryland taxes.


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