It’s an election year, so voters will inevitably be hearing talk about taxes in the coming months. Here in Maryland, lots of residents, and some of their elected officials, see it as a major issue that needs addressing.
According to a recent Washington Post story, Charles County businessman and GOP gubernatorial hopeful Charles Lollar is waxing bold on the matter. Lollar, while not offering any of those pesky details about when or how, is proposing that Maryland’s personal income tax be phased out completely.
Meanwhile, in the General Assembly, Republicans have also seized on the subject, though in less dramatic fashion. The Post reports that GOP legislators have proposed a modest 5 percent reduction in personal income tax rates — to be instituted over a three-year period.
As for Lollar’s proposal, House Majority Leader Kumar P. Barve, D-Montgomery, says, “Basically, he’s saying we can have hot-fudge sundaes for breakfast, but he won’t tell us what exercises we have to do to work it off.”
That’s a humorous observation, but one that bears consideration. According to the conservative-leaning Tax Foundation, seven states have no personal income tax — Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Several others tax dividend and interest income only.
But the Tax Foundation says there’s a trade-off for this loss of revenue — and it generally comes in the form of higher property taxes.
In discussing a state’s tax burden on its residents, however, the real issue is the total burden. And in order to assess that, the foundation argues that you need to consider sales taxes, property taxes and income taxes.
When the Tax Foundation did that, it found that the five lowest-tax states were Alaska, Nevada, Wyoming, Florida and New Hampshire, with tax rates ranging from a low of 6.4 percent (Alaska) to a high of 7.6 percent (New Hampshire).
The five highest-tax states were (drumroll): New Jersey, New York, Connecticut, Maryland and Hawaii, with New Jersey’s rate at 11.8 percent and Maryland’s at 10.8 percent.
According to the Tax Foundation’s calculations, as a percentage of per capita income, Maryland’s personal tax rate is among the highest in the nation.
We need to note that the Tax Foundation and the U.S. Census Bureau, which compiles its own state-by-state list of tax rates, have criticized each other’s methodology in compiling their information. However, we believe that the Tax Foundation’s inclusion of both state and local taxes provides a more accurate assessment of the total tax burden.
All this said, we still can’t support Lollar’s proposal to totally phase out Maryland’s personal income tax — at least until he tells us how we’d work off all those early-morning hot fudge sundaes.
On the other hand, we do think the modest 5 percent, three-year reduction that’s been proposed for Maryland’s personal income tax rates deserves serious consideration.