Governor Larry Hogan yesterday unveiled a proposal to cut taxes for retirees by more than $1 billion over the next five years. “People who have been lifelong Marylanders and have contributed so much, and still have more to offer, are moving to other states for one reason—our state’s sky-high retirement taxes,” said Governor Hogan.
The bill would eliminate all state tax on the first $50,000 of income for retirees making up to $100,000 in federally adjusted gross income. Retirees with Maryland income up to $50,000 would pay no state income tax. This tax reduction would be phased in over five years, beginning in FY 2022.
According to Governor Hogan:
“This legislation will provide tax relief to 230,000 Marylanders, is the largest tax reduction in Maryland in more than two decades, and it will keep tens of thousands of Maryland retirees from being forced to flee our state,” the governor continued. “As long as I am governor, I will continue to fight to make it easier for Maryland families, small businesses, and retirees to stay in our state, and to make it easier for all Marylanders to keep more of their hard-earned money.”
While this proposal is seemingly focused exclusively on the state’s tax structure, it may extend to local revenues as well. Changes to exemptions, deductions and subtraction modifications at the federal and state levels affect the taxable income base – and thus have carryover effects on county revenues.
Details of the plan were not readily available, but the Spending Affordability Committee estimates that Maryland’s General Fund will have a cash shortfall of $206.1 million at the close of fiscal 2021. The structural deficit is somewhat larger at $419.2 million.
According to MarylandReporter.com:
MarylandReporter.com asked Hogan at the news conference how the proposal might affect the state’s economy.
“I haven’t seen the proposal and maybe I’ll let the budget secretary try to tackle that one. But I’m sure it would have some impact. But I haven’t seen any studies on that.”
Secretary of Budget and Management David Brinkley followed up on the question.
“It could be a hybridization of whatever they’ve done in the past. But we have to see how that affects corporate earnings and everything else here. We haven’t seen the details on that particular one so we can get back to you once we see all that. But it’s a repeat pattern of things that have come in the past and have been turned down by the legislature.”
Stay tuned to Conduit Street for more information.