Revenue Estimates Board Updates Projections – by $434 Million

The state’s Board of Revenue Estimates updated its revenue projections for fiscal 2019 – increasing its projection by $433.6 million as a result of federal tax reform. It also decreased its projections for fiscal 2018 by $39.4 million.

Comptroller Peter Franchot indicated the following in a statement:

These new estimates are heavily influenced by the Tax Cuts and Jobs Act passed by Congress and signed into law by President Trump. While I am optimistic about this considerable increase in the General Fund, I want to offer a note of caution, as there are two stories to tell.

First and foremost, our revenue estimating team reports a 34 percent growth in our fourth quarter estimated payments, which was highly unusual. This is three times what we would normally witness. Attempting to determine if this was an intentional taxpayer strategy to pay tax bills in full in an effort to receive a vast federal refund before that option is gone — or something else entirely — remains to be seen.

Another concern with the new tax code is what I call Sticker Shock. While the potential federal refund may be tantalizing, citizens used to getting a state refund might not get one or may end up owing money. For those living paycheck to paycheck, this could be devastating.

In addition, this overall revenue windfall is masking another economic reality: reductions to both withholding by $30 million and sales tax by $15 million annually. Serving as a reminder that Maryland is still feeling the long tentacles of the Great Recession pulling down our economy. This is a true-up to our underlying wage and retail sales tax base that are small in the grand scheme of things, but reflective of lethargic wage growth and subdued consumer spending.

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