As reported in the Baltimore Sun, Maryland residents may be more affected by the fiscal cliff tax deal than residents in other parts of the country.
Maryland is one of the wealthiest states, and its residents have the nation’s highest median income. That means they likely will feel the impact of a higher income tax rate on the rich as well as a phase-out of deductions on the not-quite-so-rich.
On the other hand, many well-to-do households here will benefit from an inflation-adjusted $5 million exemption from federal estate taxes. Congress also provided permanent relief to the alternative minimum tax that often hits residents in high-tax states like Maryland.
While tax impacts of the fiscal cliff deal may be ascertained, the federal sequestration cuts are still looming. As reported by Governing, these looming cuts may have a negative impact of state legislators’ ability to determine their own budgets.
The concerns that state and local leaders had about the impact of sequestration on programs like education grants, affordable housing and workforce development remain valid, and all of the nuances of which programs will be affected by automatic cuts appear to remain the same. . . The two-month delay in addressing sequestration could also cause some challenges for state budgets because some state lawmakers will likely be engrossed in their budget planning process by the time Congress figures things out in two months. . . The deal also didn’t address the federal tax exemption for municipal bond interest — something both state and local leaders are fighting to protect —
For more information about the impact of federal sequestration on Maryland, including a change in the municipal bond status, see our related posts