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.
The 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.