In his ample spare time, Bureau of Revenue Estimates Director Andrew Schaufele of the Comptroller’s Office managed to put together The Impact of Age Demographics on Maryland’s Economic and Tax Revenue Outlook – complete with county-level demographics data.
The report examines the age structure of Maryland’s tax paying population in order to attempt to get to the bottom of the cause of the State’s – and counties’ – slowing economic growth. The changing age composition of our labor force has generally been blamed as one of the contributors, and this report evaluates the theory.
It not only found it reliable, it also found that the effects are not going away any time soon.
This assessment finds that the changing age structure has and will continue to restrain Maryland’s tax revenue growth throughout the existing six year budgetary planning window. It helps explain why income tax revenue growth has not returned to historical levels. Furthermore, while a host of assumptions apply, it is possible to estimate the level of its impact through 2040. Three findings in particular demonstrate Maryland’s vulnerability:
1. In the time period for which the Bureau has reliable data, from 2001 forward, changes in age structure between tax years 2010 and 2014 account for a reduction of $109.3 million in 2014 revenue.
2. The data revealed a post-Great Recession decline of 3-5% in the Taxpayer Participation Rate (TPR) of the most productive segment of its labor force, the 45-64 age cohort.
3. All else equal, the age structure will depress revenue through at least 2040, with the most intense pressure on revenues occurring around 2030, at which point it may be subtracting up to 3% of the year’s income tax revenue, or about $330 million in 2015 dollars per year.