Congressional Dems Warn That Federal Tax Law Is ‘A Disaster’ for Md.

By Bruce DePuyt

Hundreds of thousands of Maryland households will pay more in taxes in 2019 because of the federal tax overhaul, according to Democrats in the state’s congressional delegation, who on Friday challenged Gov. Larry Hogan (R) to provide relief.

More Maryland residents — 87 percent, or 1.3 million households — deduct state and local taxes on their federal returns than any other state in the nation, an average of $12,930 per family. The new law caps those deductions at $10,000.

“Clearly, this tax overhaul is going to be a disaster for taxpayers in our state,” Rep. Steny H. Hoyer (D) told a group of municipal, business and labor leaders in Prince George’s County.


Left to right: Sen. Chris Van Hollen, Rep. Steny Hoyer and Rep. Anthony Brown warn Prince George’s County business and civic leaders of the consequences of the recently-enacted Republican tax package.           Photo by Bruce DePuyt

Because corporate tax relief in the GOP-passed tax law is permanent, while provisions helping individuals sunset in the next decade, lawmakers said the number of Maryland households seeing a tax hike will jump from 360,000 next year to 700,000 in 2027.

Sen. Chris Van Hollen (D) called the measure “really atrocious.” Said Rep. Anthony G. Brown (D): “Instead of tax reform, we got a tax scam.”

The state’s congressional delegation, with the exception of the lone Republican, Rep. Andy Harris, sent a letter to Hogan, offering to work with him in mitigating the impact of the new law.

“We understand that you are exploring ways to prevent increases in Maryland state income taxes due to the linkages between the state and federal tax code,” the lawmakers wrote, “but we would like to know if you plan to protect Marylanders from higher federal taxes as well.”

Douglass Mayer, a spokesman for Hogan, said the governor would introduce legislation in reaction to the new federal tax laws in the “next several weeks,” after he receives a report on their impact from state Comptroller Peter Franchot (D).

“The main issue is that state revenues are going to increase by between $500 million and a billion dollars,” Mayer said. “The governor’s plan is to introduce legislation to return that money back to those taxpayers… to hold all Marylanders harmless.”

Mayer added that the efforts by the congressional Democrats “seems a little disingenuous” because they have not called Hogan personally to discuss the challenges the new tax law presents.

“Our office has a plan and we want to know if they will support it,” he said.

At the meeting Friday with the congressional lawmakers, Prince George’s mayors expressed concern that the tax overhaul will hurt revenue, reducing their ability to provide local services. This is “foolishness, this is craziness,” said one.

A real estate agent predicted that first-time homebuyers will find reduced inventory, because “move-up” buyers will decide to stay put rather than purchase a home with a larger mortgage.

“They don’t want to live in West Virginia and commute,” Veera Phillips, president-elect of the Prince George’s County Association of Realtors.

Donald F. Kettl, former dean of the University of Maryland School of Public Policy, told lawmakers, “There’s probably no state in the country, border to border, more effected [by the tax changes] than Maryland. … The total amount of tax deductions lost in Maryland by this tax reform is $4 billion. Virtually every county in the state is going to be affected. This is a serious impact.”

Kettl said “early projections” suggest that property values will drop between 1.8 percent in Calvert County and 3.2 percent in Montgomery County next year. “For many people who have [their homes] as the largest part of their savings, they’re going to take a hit. Property tax revenue will drop, so the impact on [local government services] is enormous.”

How much the state loses in revenue, and whether localities see a loss in both state aid and direct taxes from homeowners, could take a year to determine, he said. “What we have is an incredible situation, where the impact is going to be huge.”

Hoyer again slammed Republicans in Congress for “rushing” though a tax bill without input from Democrats or the public, and for steering the bulk of the benefit to the richest Americans. He said the average middle class family, one earning $59,000 a year, would see the same benefit in a year ($1,182) that an earner in the “top 1 percent” would get in a week ($1,191). “We should have reversed that,” he said.

Hoyer said President Trump and his family “will be huge beneficiaries of the tax law changes, despite claims to the contrary.”

Harris’ office did not immediately respond to a request for comment.


One comment

  • Richard L Strombotne

    The biggest problem for Maryland taxpayers created by the Federal tax cut bill is the increase in the standard deduction for joint filers to $24,000. A Maryland taxpayer who claims the federal standard deduction cannot itemize deductions on the Maryland return. The increase in the Federal standard deduction will affect only those MD taxpayers who itemize tax deductions, and specifically, those who are in the six lowest Maryland Adjusted Gross Income (MAGI) classes up to $150,000. The taxpayers who filed 998,603 returns in 2014 with MAGI less than $150,000 claimed itemized deductions amounting to $15.95 billion. They all would claim Maryland standard deduction of $2,000 for single filers and $4,000 for joint filers worth about $3.1 billion in 2018. The difference is $12,85 billion and would amount to increases in their Maryland state and local income taxes of $996 million paid for by this limited segment of taxpayers.

    The Maryland tax code can be modified to reduce the amount of Maryland state and local taxes on these taxpayers but it also benefits the taxpayers who previously claimed the MD standard deduction. It is straight forward and needs only a few changes to the Maryland tax code. It is to increase the standard deduction to $8,000 for single filers and to $16,000 for joint filers while keeping the formula for standard deduction equal to 15 per cent of MAG above the lower limits of $1,500 and $3,000 respectively. The total benefits are a reduction in Maryland state and local income taxes amounting to $894 million. The benefits would be 2.5 times greater for those taxpayers who previously itemized than for those taxpayers who previously claimed just the Maryland standard deduction.

    The estimates presented here are based on the data in the reports from the MD Comptrollers Office: Personal Statistics of Income, 2014, and Summary of Income Tax, 2016. The models for making these estimates use a 50-50 split between single filers and joint filers.

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