June 25, 2018
Politics & Opinion
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An Update On Tax Cuts

Nic Kipke
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February 21, 2018

Since the federal Tax Cuts and Jobs Act was passed in December, there have been many questions and guesses about its impact on taxpayers. The news has been filled with forecasts of doom, gloom and fear. But soon after the bill’s passage, company after company across our nation began announcing bonuses and wage increases for their employees – dollars that were freed up as a direct result of the Tax Cuts and Jobs Act. Critics of the bill have scoffed at these bonuses, going so far as to call them “crumbs.” But the more time that passes, the more these critics arguments begin to sound like hollow political gibberish.

At the end of January, Comptroller Peter Franchot’s office issued a report identifying the impact of the Tax Cuts and Jobs Act will have on Maryland taxpayers. Their fact-based, nonpartisan report found that the vast majority of Marylanders will see significant federal tax relief to the tune of $2.8 billion. Two million taxpayers across Maryland are expected to benefit from the Tax Cuts and Jobs Act, with an average tax cut of $1,741 per taxpayer. The Tax Cuts and Jobs Act will impact our state in other ways, though. Changes to the federal tax laws have lifted the veil and illuminated the fact that Marylanders pay high state and local income taxes and high property taxes. Therefore, unlike most other states, Marylanders could face an additional $1.2 billion in state income tax payments, unless the General Assembly modernizes our tax code.

In order to prevent this increase in Maryland taxes, Governor Larry Hogan has proposed the Protecting Maryland Taxpayers Act of 2018, which makes permanent a provision in Maryland law that prevents changes in the federal tax code from affecting Maryland’s state and local taxes. The legislation will enable Marylanders who choose to take the standard tax deduction at the federal level to itemize deductions at the state level, whereas currently, taxpayers opting to take the federal standard deduction also have to do so at the state level. This provision will make it possible for Marylanders to get “the best of both worlds” by taking advantage of the higher federal standard deduction while still utilizing longstanding deductions at the state level.

The bill also addresses an additional potential $1.2 billion tax increase Marylanders could face in Fiscal Year 2019 as a result of changes to personal exemptions and ambiguity in state law. The governor stressed the need to find a legislative solution to this ambiguity, rather than subject Maryland taxpayers to the confusion and uncertainty of potentially differing legal opinions.

I believe the hallmark of true leadership is knowing that you don’t know everything and that the best ideas often come from collaboration. In addition to introducing the Protecting Maryland Taxpayers Act, Governor Hogan assembled a bipartisan team of former legislators to work with legislative leaders to come to a bipartisan solution to protect Maryland’s taxpayers.

In early February, to protect taxpayers, the Maryland state Senate passed legislation that aligns with the governor’s goals. However, the House of Delegates has been much slower to take action, and that worries me. Some legislators are hoping to keep the state tax increase instead of passing it along to our constituents in order to blame Congressional Republicans and President Trump. Marylanders have the potential to benefit greatly from the federal income tax cuts. It would be a shame if, because of partisan squabbling, these benefits were snuffed out by an unnecessary and easily fixed state income tax hike.

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