Maryland: But We Really Have to Tax Somebody!

By April 8, 2008Taxation

The much-hated-in-anticipation Maryland tax on computer services is repealed. But to replace those revenues …

The General Assembly repealed a new sales tax on computer services before it went into effect and replaced the unpopular $200 million levy with a combination of cuts and a three-year individual income tax surcharge on earnings of more than $1 million. Passed in the final hours of last year’s special session, the so-called “tech tax” was opposed by a broad consortium of business groups that warned the measure would destroy Maryland’s high-tech economy and cause a migration of well-paying employers out of state.

Ah, that’s the strategy. A mighty wave of unrest rose against the tech tax: It was a broadly based tax that also hit a large, vocal group of people with organizational and communication skills, so they mobilized an effective lobbying force. Upper-income taxpayers represent a smaller group and if they complain, you can beat them up for being selfish.

Except what’s the consequence to the state? The Maryland Chamber, which opposed the tech tax, had a good primer on the alternative tax scheme:

The proposed new income tax bracket of 6.25% would make Maryland’s top rate the 4th highest in the country (combined state and local), behind only California’s 10.3%, Rhode Island’s 9.9%, and Vermont’s 9.5%. The new combined rate of 9.45% would be significantly noncompetitive with our neighboring states of Virginia (5.75%), West Virginia (6.5%), Delaware (5.95%), the District of Columbia (8.7%) and Pennsylvania (3.07% gross). We believe that this income tax increase would be counterproductive to Maryland’s economic development.

Not a good campaign slogan: Making Maryland Less Competitive!

Join the discussion One Comment

  • Rocky says:

    I moved out of California because I am so tired of the high income taxes. I am a millionare but I do not have 1 million income every year. Still, I moved to Seattle. There is no income tax in state of Washington. My salary increase about $10k a year after the move. That is not important. But I was paying more than $20+K each year to California. Yes I can afford it, but I love to get ride of it. Many people think rich people can no longer make the same income if they move out, that could be a criticial mistake.

    For each person who leave, not only the new tax is uncollected, even the existing tax s/he current paying is gone.

Leave a Reply