November Income Tax Distributions Indicate Improvement in Economic Picture

The Office of the Comptroller released its detail of the November distributions of county income taxes.  According to the electronic message, the November distribution totals $891.6 million, an increase of 3.5% over last year’s distribution.

The overall quarterly distribution of withholding and estimated payments by grew by 2.6%, with all but four counties posting an increase.  This distribution is the first using tax year 2009 data, therefore a portion of the change reflects the shift in each county’s share of total local income taxes collected, and the other calculations based on tax returns processed. Third quarter distribution calculation shows that withholdings attributable to the third quarter of tax year 2010 increased by 4.5% to $2.5 billion, while estimated payments fell by 1.9% to just under $350 million.  After factoring in late second quarter receipts, overall third quarter gross receipts grew by 3.7% to $2.9 billion.  This indicates some improvement in Maryland’s economic picture.  Employment has accelerated in all but one of the eleven months through September; for the third quarter, employment increased 0.7%.  Not stellar, to be sure, but it is the best growth since the third quarter of 2007. Finally, after accounting for an increase of 29.8% in the unallocated reserve and an increase of 2.4% in the refund reserve, as well as an increase of in the cost of administration of 38.6% – mainly due to the MITS implementation – the net distribution increased by 2.6%.

The November adjusted distribution reconciles the total amounts distributed for tax year 2009 to the amounts shown on all 2009 tax returns filed by the October 15 extension deadline.  The total adjusted distribution increased by 9.1%.  As expected with a reconciling distribution, there is substantial variation between the counties.  Eleven counties saw this distribution fall compared to last year, while eleven saw the distribution increase;
both Baltimore County and Talbot County are not receiving a November reconciling distribution again this year.  The final reconciling distribution for tax year 2009 will be made in January.

Statewide, net local tax liability for tax year 2009 is $3.5 billion, a decline of 3.4% compared to tax year 2008, and a two year decline of 10.6% when compared to tax year 2007.  Local liability in both Talbot and Kent counties fell again this year by more than 10%, while only four counties saw an increase in net local liability in 2009.

If you have questions regarding the September distribution, please contact George Freyman of the Revenue Administration Division, at 410-260-7455.

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