The majority of Maryland’s Congressional delegation sent Governor Larry Hogan a letter inquiring about his plans to ease Maryland taxpayers’ increased tax burden, resulting from the federal government’s tax reform package.
Beginning January 1, 2018, Americans can no longer deduct any more than $10,000 of state and local tax (SALT) deductions from their federal taxes. This severely disadvantages Marylanders. According to Maryland Matters:
More Maryland residents — 87 percent, or 1.3 million households — deduct state and local taxes on their federal returns than any other state in the nation, an average of $12,930 per family.
Facts cited in the letter:
- Over 360,000 Maryland households will see a tax increase in 2019 as a result of tax reform. According to Maryland Matters, lawmakers have said that this number will increase to 700,000 households by 2027.
- The average SALT deduction claimed in Maryland is $12,931, which is higher than the $10,000 cap.
- California and New Jersey are considering implementing a tax credit for taxpayers “who make charitable contributions to support state and local government programs,” which are deductible from federal taxes as charitable contributions. The Washington Examiner provides information on this idea.
- New York is considering shifting revenue collections on personal income taxes to payroll taxes on employers, because corporations can still claim uncapped SALT deductions.
- Some states are considering suing the federal government over the constitutionality of capping the SALT deduction.
According to Maryland Matters:
Donald F. Kettl, former dean of the University of Maryland School of Public Policy, told lawmakers, “There’s probably no state in the country, border to border, more effected [by the tax changes] than Maryland. … The total amount of tax deductions lost in Maryland by this tax reform is $4 billion. Virtually every county in the state is going to be affected. This is a serious impact.”
Kettl said “early projections” suggest that property values will drop between 1.8 percent in Calvert County and 3.2 percent in Montgomery County next year. “For many people who have [their homes] as the largest part of their savings, they’re going to take a hit. Property tax revenue will drop, so the impact on [local government services] is enormous.” [Emphases added.]
Governor Hogan’s spokesperson, Douglass Mayer, indicated that Governor Hogan plans to release legislation to address the impacts on taxpayers after Comptroller Peter Franchot issues his report on tax reform’s impact on Maryland. That report is expected in about two weeks. Said Mayer:
The main issue is that state revenues are going to increase by between $500 million and a billion dollars. The governor’s plan is to introduce legislation to return that money back to those taxpayers… to hold all Marylanders harmless.