The 2018 session is complete and with it, any changes to Maryland’s tax code for the next year. Over the session, the General Assembly made few changes to state and local income tax collections. However, those changes may be significant for county budgeting purposes.
Prior to any enactment of significant income tax changes at the state level, the Comptroller’s Office estimated that local income tax revenues would increase by an estimated $255.0 million in fiscal 2019 and $199.0 million in fiscal 2020, as a result of federal tax reform. A significant portion of that revenue gain is due to the shift in taxpayers who will now claim the standard deduction.
Bills passed by the General Assembly which subtract from the original estimate include:
- Senate Bill 318 & House Bill 570, which alter the value of the standard deduction beginning in tax year 2018 by increasing its maximum value from $2,000 to $2,250 for single taxpayers and from $4,000 to $4,500 for taxpayers filing jointly. Beginning in tax year 2019, the value of the standard deduction is indexed based on the annual change in the cost of living. MACo estimates that altering the value of the standard deduction will decrease county income tax revenues by $34.0 million in fiscal 2019, $26.5 million in fiscal 2020, $29.8 million in fiscal 2021, $33.24 million in fiscal 2022, and by $36.9 million in fiscal 2023.
- Senate Bill 996, as well as House Bills 296 and 327, expand the existing military retirement income tax subtraction modification by increasing from $10,000 to $15,000 the maximum amount of retirement income deductible from Maryland adjusted gross income. In order to qualify for the increased subtraction modification, the individual must be at least 55 years old. The bills also expand the existing subtraction modification for retired “hometown heroes” by extending eligibility to correctional officers. Local income tax revenues are expected to decrease by $4.3 million in fiscal 2019 and by $4.7 million in fiscal 2023.
- House Bill 96 (Ch. 36) creates a subtraction modification for up to $7,500 of the qualified expenses incurred by a living organ donor. Local revenues are expected to decrease by $13,000 in fiscal 2019 and by $16,000 in fiscal 2023.
- House Bill 43 creates a subtraction modification for up to $50,000 earned from the sale of a perpetual conservation easement on real property
located in Maryland. Local revenues are expected to decrease by $110,100 in fiscal 2019 and by $135,200 in fiscal 2023.
- House Bill 1069 increases to $7,000 the value of the subtraction modification for qualifying volunteer fire, rescue, or emergency medical services personnel – but not until fiscal 2021. Local revenues are expected to decrease by $332,000 in fiscal 2021 and by $663,000 in fiscal 2023.
- House Bill 671 creates a subtraction modification of up to $250 for classroom supplies that are purchased by an elementary or secondary classroom teacher. Local revenues are expected to decrease by $588,000 annually beginning in fiscal 2019.
Income Tax Legislation - County Effects
|Bill||What It Does||What It Earns (Costs) (FY19) (millions)||What It Earns (Costs) (FY20) (millions)|
|Federal Tax Cuts and Jobs Act of 2017||Overhauls federal tax code||$255||$199|
|SB 318 & HB 570||Increases standard deduction & indexes to cost of living||($34)||($26.5)|
|SB 996; HB 296 & 327||increases subtraction modification for military retirees and retired correctional officers||($4.3)||($4.4)|
|HB 96||creates subtraction modification for organ donors||($0.013)||($0.014)|
|HB 43||creates subtraction modification for sales of perpetual conservation easements||($0.110)||($0.115)|
|HB 1069||increases subtraction modification for volunteer fire/EMS||0||0|
|HB 671||creates subtraction modification for classroom supplies||($0.588)||($0.588)|
For a wealth of information regarding what happened this legislative session, including regarding income taxes, see the Department of Legislative Service’s 90 Report.