Budget institute recommends $2.6 billion in tax hikes

The progressive Maryland Budget and Tax Policy Institute is recommending $2.6 billion in tax increases to cure state budget shortfalls, including $2 billion on consumer services that are not currently taxed.

money stacksThe group also recommends raising the state income tax, among the highest in the nation, on millionaires and also on families making more than $150,000 a year. The group continues to support a change in corporate taxing known as combined reporting and closing corporate loopholes.

Neil Bergsman, the head of the budget institute, agreed that there’s no apparent enthusiasm for tax hikes in the legislature.

“I recognize there’s not a lot of stomach for looking at tax increases,” Bergsman said. “I want them to have options on the table whenever their ready to dine.”

“The gap between rising public needs and the revenue it takes to meet them has been and continues to be a serious problem,” says the report. “For the sake of jobs today and economic recovery in the future, Maryland should employ reasonable revenue options that would reduce reliance on spending cuts and preserve public investments in education, health, public safety and other essentials.”

Bergsman’s recommendations put him at odds with most business groups in the state, except on one point: he agrees with the Maryland Chamber of Commerce that new sales taxes on business-to-business services such as payroll processing, engineering and legal fees should be avoided, since they tend to pyramid the costs into higher consumer prices.

Extending the sales tax to almost all consumer services would generate the most revenue.

Bergsman would exempt such basic household services as health care, housing, education, legal, banking, public transit, insurance, child care and funeral services. Car repairs, cable TV, hair cutting and almost everything else would be taxed at 6%.

Bergsman rejects the idea, embraced most recently by economist Anirban Basu in a report for Blueprint Maryland, that Maryland taxes have kept down job growth or encouraged high-earners to move out of state.

“There really isn’t evidence to support that that happens,” Bergsman said.

—Len Lazarick

About The Author

Len Lazarick


Len Lazarick was the founding editor and publisher of MarylandReporter.com and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

1 Comment

  1. Jimtwoputts

    Re: paragraph five, Neil and his institute should learn the difference between public needs and wants.