The Maryland Public Policy Institute
It’s the beginning of July, and that means a host of new laws are taking effect in our state. Obviously someone liked these laws, or they would never have passed the General Assembly and been signed by the governor. But for those of us interested in limited government, many of these laws aren’t anything to celebrate. As may be expected, we at MPPI had a few things to say about these laws when they were being considered by the General Assembly, so I think it’s only appropriate to remind you of what we said now that these laws are in effect.
First off, many in Maryland will be paying higher income taxes starting July 1. These income tax hikes were enacted in a special legislative session to avoid the so-called “doomsday budget,” a budget that was balanced and increased spending over last year’s level. But for the governor and legislators, it didn’t increase spending enough, so taxes had to be raised.
As I pointed out in The Doomsday Budget: Myths and Facts, the so-called “cuts” to spending in the Doomsday Budget wouldn’t have affected average Marylanders: “The vast majority of the savings would arise from streamlining state government, eliminating special interest tax credits, and eliminating slush funds used by legislators to provide college scholarships.”
Gabriel Michael, in A Tax Increase or “Doomsday”? We’ll Take our Chances, notes that the governor had a pretty poor plan to fund this new spending:
The administration's plan actually functions as a disincentive to earn more. Unlike marginal tax rates, which kick in only on income above a certain threshold, the governor's plan - by reducing the deductions and exemptions taxpayers can claim if they exceed set amounts of income - effectively becomes a penalty for earnings slightly above threshold amounts. Under this tax policy, it makes more sense to earn only $100,000 rather than a little more. In many cases, earning that extra bit would result in owing additional taxes that outweigh the additional income.
Part of the Doomsday Budget “fix” was shifting some burden for teacher pensions onto the counties. Marta Mossburg rightly points out that Shifting Pension Burden Means Higher Taxes:
… shifting part of the cost of teacher pensions to the counties and Baltimore City over four years, as legislators did during the recent special session of the General Assembly, is not going to save anyone from funding problems; it just moves a chunk of the burden to the local level. Making counties accountable for the salaries they offer to teachers is right. But local governments will not come out "way, way ahead," as this paper editorialized. Higher taxes passed this year will help counties pay for the shift in the same way a Band-Aid can stem the bleeding of a severed limb.
Another item from the Doomsday Budget “fix” that takes effect today is the increase in taxes on small cigars. This tax increase was pushed by lobbyist Vinny DeMarco as a way to curb teen usage of these items. Too bad there’s no evidence that teen usage of cigars is a problem that’s growing, as I pointed out in Myths and Facts about Tobacco Taxes: “Maryland has seen a slight increase in the percentage of underage youth who use cigars since 2000, but the share of youth using cigars peaked in 2008 and is currently declining. It is unclear what is causing this decline, but it is happening without any increase in the cigar tax.”
As you can tell, MPPI worked pretty hard to convince lawmakers about the flawed policies they were considering. And, as you can also tell, they didn’t listen to us. We fought the law and the law won, but in reality no one except a few special interest groups won during this year’s two legislative sessions.
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