Rain Tax Featured in Maryland Gubernatorial Campaign

September 12, 2014

The latest advertisements on behalf of Larry Hogan, the GOP candidate for Maryland’s Governor, have focused on tying his opponent, Lt. Governor Anthony Brown, to the tax policies of Governor Martin O’Malley (D). In his tenure as Governor, O’Malley has increased or created new taxes 40 times, including a sales tax increase from 5% to 6% and an alcohol tax hike from 6% to 9%. But perhaps the most infamous is the highly debated “rain tax.” As we have reported previously, the “rain tax” is a storm water tax, based on the amount of “impervious surface” on a property. That is, the more building space and pavement on a taxpayers land, the more money owed to mitigate the runoff damage. Government property is exempt from the tax, while religious and nonprofit organizations (including environmental organizations) are not.

Several counties around Maryland have come up with their own ways of protesting the rain tax. Frederick County executives voted to make the tax just a penny, while Carroll County diverted county funds to state storm water management rather than levying the tax. Baltimore City, on the other hand, charges up to $144 per residential single family home, depending on the amount of impervious surface.

Surprisingly, the use of taxes to regulate storm water runoff may not be an EPA-required program, as has been suggested. The tax derives itself from the Clean Water Act (CWA), but federal district courts in Virginia ruled that the CWA does not authorize the EPA to limit storm water flow in Total Maximum Daily Loads (TMDLs) because such flow itself is not a pollutant. The EPA has chosen not to appeal the decision. At this point, Marylanders are being asked to pay a tax that other states aren’t paying based on a law that was wrongly applied.

While other Chesapeake Bay border states have opted not to directly charge residents for their storm water runoff, Maryland chose to enact the tax in its 10 most populous jurisdictions. The tax unfairly targets a select few “polluters” (although as the courts ruled, storm water itself is not technically a pollutant) —a neutral tax would require all watershed citizens being charged. Furthermore, government properties, with their expansive paved areas and large buildings, no doubt also contribute to runoff. Finally, a tax based on impervious surfaces doesn’t even capture the supposed pollutant correctly: houses on differently sloped land, with different yard plants, with different roof structures and catchment systems, neighborhoods with different topographies, and even local weather conditions can lead to radically different amounts of runoff. With Maryland having the 7th highest state-local tax burden in the nation, the rain tax piles more weight onto an already cumbersome tax code.

Read more on Maryland.

Follow Amber on Twitter

Update: An earlier version of this blog stated that Baltimore charged "at least" $144 rather than "up to." A phrase stating that other Chesapeake Bay states had chosen "not to fund" storm water runoff reduction was also changed to say "not to directly charge residents" for clarity. However, as the charge claims to provide a general benefit to society, not a specific benefit accruing to a user, we continue to identify it as a tax, not a fee. For more on the difference between taxes and fees, see our book on the topic.

Was this page helpful to you?


Thank You!

The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?

Contribute to the Tax Foundation

Related Articles