February 2, 2010

How much of your income tax goes to the county?

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By Erich Wagner
Erich@MarylandReporter.com

State taxpayers might get a chance to see on their paystubs just how much of their income tax dollars are going to their local government.

A bill, heard Tuesday in the House Ways and Means Committee, would distinguish local tax withholding from the state’s on employees’ pay statements.

State and local taxes are now lumped together through what is called the “piggyback tax,” which the state collects for local governments. Counties’ income tax rates range from 1.25 percent in Worcester County to 3.20 percent in Howard, Montgomery and Prince George’s counties.

Maryland’s top income tax rate of 6.25 percent compares closely with competing states Virginia (5.75 percent), Delaware (5.95 percent) and North Carolina (7.75 percent), according to a report by The Tax Foundation, but some critics say the state’s rate is effectively much higher because of the local rates.

Northern neighbor Pennsylvania has a flat tax rate of 3.07 percent for any income, but local jurisdictions take an average of 1.25 percent of taxpayers’ income, while Delaware localities take an average of 1.16 percent in additional taxes.

The bill received a short hearing, and delegates had no questions about the proposal. Del. Warren Miller, R-Howard, the bill’s sponsor, described the legislation as “simple” and common sense.

“It’s letting our taxpayers know that the counties get income tax,” Miller said. “So a lot of people don’t realize at the end of the year when they look at their tax statement, they say, ‘Oh look, the state took $3,000.’ They don’t realize that the particular counties that they live in get a portion of that.”