Think Tank Proposes Sweeping Tax Overhaul to Fund Kirwan Recommendations

A Baltimore-based think tank last week released a report detailing its policy recommendations to fund the ambitious multi-billion-dollar-annual recommendations of the Kirwan Commission, a proposal which amounts to a significant overhaul of Maryland’s tax system.

The Commission on Innovation and Excellence in Education, known informally by the name of its chair, former University of Maryland Chancellor William “Brit” Kirwan, has issued its major recommendations. They have called for a package of new school investments totaling some $3.8 billion per year, with most of the changes phasing in between fiscal years 2021 and 2024.

The liberal-leaning Maryland Center on Economic Policy is calling on state lawmakers to adjust the state’s income tax, corporate tax, and sales tax systems in order to generate $1.9 billion annually by 2030, while minimizing the effects on low and middle-income Marylanders.

Assuming the State continues to provide about half of all non-federal funding for Maryland public schools, this revenue would fully cover the state share of the education reform plan the Kirwan Commission is considering.

According to the report:

Smart reforms to our state’s revenue system can close loopholes placed there by special interests and provide the additional funds our schools need. Our tax code today includes several ineffective components that hold Maryland back from being the best state we can be. As a result, revenue growth generally does not keep up with our needs, and our tax responsibilities get distributed upside-down—allowing the wealthiest to avoid making the same contributions the rest of us do. If we clean up our tax code, we can afford to build a world-class public school system that will enable children across our state to thrive.

We face a choice: Do we clean up our tax code to invest in world class schools, or do we go down a path that leaves our schools falling further behind and our economy worse off? Without additional revenues, the only way to adequately fund schools would be to drastically cut other services Marylanders rely on, like health care and transportation.

According to Maryland Matters:

The center broke down its funding recommendations into three categories:

Changes to the tax code, primarily affecting businesses and wealthy residents, that would generate $560 million;

Changing the state sales tax to include a tax on services and online sales, which would generate $460 million, a figure partially offset by increased tax credits for lower-income families; and

Restructuring the state’s income tax to lower rates for low- and middle-income residents while raising rates at higher tax brackets. With other changes to state tax policy like increasing the rate of taxes on capital gains, income tax changes could generate $920 million, the organization said.

Maryland’s current tax system “creates a revenue system that doesn’t keep up with Marylanders’ needs, that further concentrates wealth and power in a few hands, and does nothing to reduce the economic barriers that hold back many Marylanders, especially people of color,” MDCEP Research Analyst Christopher Meyer, who wrote the report, said Friday.

Useful Links

Previous Conduit Street Coverage: Kirwan Commission Wraps 2018 Work, Issues Broad $3.8B Recommendations

Read the Full Report from the Maryland Center on Economic Policy

Maryland Matters: Think Tank Pushes Tax Reform as Answer to Kirwan Funding Woes