Testimony to the Maryland House Ways & Means Committee on H.B. 1286 – Maryland’s Tax Rates Dismiss Regional Tax Competition

Download Testimony to the Maryland House Ways & Means Committee on H.B. 1286 – Maryland’s Tax Rates Dismiss Regional Tax Competition

Key Findings

• From a regional vantage point, it seems that Maryland is dismissing the possible effect of tax competition. With the sales tax rate of 6% Maryland is currently tied with Pennsylvania, West Virginia, and Washington, D.C. in having the highest sales tax in the region; coming in higher than Virginia (5%) and Delaware (0%).
• Sales taxes not only impact consumers, but they can also have a detrimental effect on businesses. The seller and the consumer both bear a portion of the costs of the sales tax, the consumer through a higher price with tax included and the producer through a lower list price.
• The Comptroller’s office has estimated that revenue from the 2008 tax increases ran 44% under projection, suggesting negative economic impacts from the tax increase. Sales tax receipts were projected to fall 3.5% in FY 2009 after adjusting for the rate increase and other law changes, with all major components of the sales tax declining except for receipts from utilities.
• A sales tax reduction would be a positive first step toward improving the state’s business tax climate. The 20% reduction in the rate (from 6% to 5%) would result in a rise in Maryland’s State Business Tax Climate Index from 45th to 43rd.