Sales Tax Voted Down…Now What?
March 5, 2020,
The debate over funding for the educational reforms proposed by the Kirwan Commission is in full force. On Monday, March 2nd the House of Delegates held hearings on HB 1628, a bill that would impose a new 5% sales tax on services. The hearing attracted hundreds of concerned business owners and other stake holders who testified against the bill. On Wednesday, March 5th, the House Ways and Means Committee voted to not allow the bill to move forward. So this tax proposal is dead so now what?
Members of the House of Delegates are considering other ways to raise the State’s portion of the estimated $4 billion dollars a year required to fund the Kirwan recommendations. The House will be looking at a smaller revenue package which could include a sales tax on certain professional services, closing some so-called corporate loopholes and increasing the tax on tobacco and vaping products. The tax on digital advertising is still being considered and there is a lot a talk about taxing digital downloads and streaming services. Watch out the cost of Pandora for you and your kids might be going up.
Also, in the mix is legislation that would allow voters to decide about sports betting in November. After years of fits and starts, the effort to legalize betting on sports may get the green light with a significant portion of the new revenue targeted towards the Kirwan Commission recommendations.
The State is slated to pick up about 66% of the cost of the $4 billion annual cost of Kirwan and each county will be responsible for generating the rest. The General Assembly is also finalizing a “funding formula” for each county’s share of the implementation costs. The debate about how Anne Arundel County will come up with these funds has not yet started, so stay tuned for that.
There are a whole host of bills that are focused on improving the public education system in Maryland. This initiative is being called the “Blueprint for Maryland’s Future” and contains many commonsense proposals that are widely supported by education experts and the business community. However, these proposals come with a price tag that will require $4 billion dollars of new funding. The General Assembly is seeking ways to reallocate funding and impose new taxes to pay for the “Blueprint”. Any tax increase imposed by the General Assembly must include an analysis of the negative impact it can create or Maryland residents and more specifically Maryland businesses.
The existing sales tax, a high corporate income tax, increasing real estate taxes, proposals for taxing the use of the internet and a cumbersome regulatory process are making it more difficult for Maryland based businesses to succeed and create jobs for Maryland residents. It is ironic that the ultimate goal of the Kirwan Commission and the “Blueprint for Maryland’s Future” is to create jobs but if too many taxes and regulations are put in place to implement Kirwan, it could actually drive jobs away from Maryland.