It is truly remarkable what a difference two (2) years can make. If we could journey back to ‘2006’, Marylanders were in a state of disgust over the imminent increases in energy costs. Demanding change in Annapolis, the State elected a new Administration that promised to thwart energy hikes and cut taxes on both personal income and property for middle-income Marylanders. Surprisingly enough, Marylanders elected this new Administration despite a 60% approval rating of former Governor Ehrlich’s performance during his term.
Now, two (2) years later and under the Leadership of Governor O’Malley, Maryland received a “change”. Unfortunately, Governor O’Malley has delivered a “change” – unexpected and undesirable to Marylander’s expectations. In only his first term, Governor O’Malley raised all three (3) of its major tax rates.
“We have seen no record of any state having raised all three of its major tax rates in one fell swoop, but Maryland has done just that,” said Bill Ahern, referring to the hikes in the sales tax, corporate income tax, and the personal income tax. Mr. Ahren, the author of Maryland Flouts Regional Tax Competition with Historic Tax Hike, a study, conducted for the Tax Foundation.
During Special Session, the Governor introduced a tax proposal that was approved by the General Assembly. This proposal was the largest tax increase ($1.4 billion) in State history (with the most tax categories ever raised in a single legislative session). The reason for the tax increases, was to resolve the State’s budget shortfalls – these shortfalls were the result of Governor O’Malley’s budget for the ‘2008’ fiscal year. At no time was there any serious attempt to control spending, in fact, the Special Session created $128 million in net new spending.
Additional spending was further proposed and approved under the Governor’s submitted budget for the ‘2009’fiscal year. Increased state spending totaled $31.5 billion in ‘2009’; this was an increase of $1.8 billion or 5.9% from ‘2008’.
To recover the estimated $200 million that the computer services tax was to generate in state revenue, a new 6.25% tax will be imposed on Maryland taxpayers who make more than a million dollars a year. This new tax will be the eighth (8th) tax rate and bracket on personal income for Marylanders. The actual tax rate for most Maryland income over $1 million will total to 9.45% (this includes the new 6.25% rate on income over $1 million and local income tax).
Wealthy Marylanders are not the only ones suffering from the new changes brought by the new Administration, individuals making income from $50,000 to $100,000 have felt the effects. According to the study, “middle-income taxpayers are still more heavily taxed in Maryland than any other state in the region.” In fact, there are now only five (5) states in the U.S.-California, Hawaii, Iowa, Maine, and Oregon, where a couple with $75,000 in taxable income might be in a higher tax bracket than an average Maryland couple.
In comparison to neighboring states, such as Delaware (6.82%), West Virginia (6.50%), Virginia (5.75%), and Pennsylvania (4.35%), Maryland ranks first for personal income tax rates for middle-income individuals as of January 1, 2008.3 The Maryland rate for middle-income workers is about 7.5% (4.75% state, plus 2.73% local). The personal income rate in Maryland is contributed to the high local income taxes. Maryland is one (1) of only fourteen (14) states that permit county-level income taxes and has much higher local tax rates than the other thirteen (13).
Exasperated by the new changes brought about by Governor O’Malley, many middle-income Marylanders are still waiting for the Governor to “cash in” on his promises he made two (2) years ago to cut property and income taxes during his election campaign. These Marylanders should not be fooled that he will make “good” on such promises, now or during the remainder of his term, because when the General Assembly dismissed those tax cut ideas, the Governor made no issue of it.
These two (2) years under Governor O’Malley clearly provide an exercise of egregious political rhetoric, and false promises. If the Governor does not hold himself accountable and redress these economic atrocities that he has placed on every Maryland taxpayer, the only “change” that could happen in two (2) years, is another change in Administrations.
Member, House of Delegates