More than 10,000 Marylanders will lose their jobs in just the first year if Gov. Martin O?Malley?s proposed sales and income tax hikes go into effect, according to a new economic study released Thursday by a coalition of business groups.
The study by Ernst & Young economists said that a penny increase on the sales tax translates into 5,800 people losing their jobs in 2008, primarily in retail, lodging and food services.
An increase to 6 percent in the personal income tax rate for married couples making more than $250,000 per year would mean a loss of another 4,700 jobs, said the study done for the Maryland Chamber of Commerce and 17 other business groups.
“Business pays 40 percent of the sales tax,” said Karen Syrylo, a CPA who advises the chamber on taxes. “There are a lot of business operations that are still subject to the sales tax,” including their purchases of computer equipment, furniture and supplies.
Most of Maryland?s 150,000 businesses are also not corporations and their owners pay personal income tax rates, Syrylo said, explaining how raising the rates could cause businesses to shed jobs or move them to other states.
“Fully a third of the income tax falls on the business community,” she said.
O?Malley is expected to announce today a proposal to increase corporate income taxes from 7 percent to 8 percent, a move the study said would cost 1,600 jobs.
“There is half a billion dollars in new taxes for businesses that we?ve seen so far,” said Ron Wineholt, the Chamber?s lobbyist. “We just want to stay competitive.”
O?Malley told reporters staying competitive was an important part of his decision to emphasize the sales tax in his tax package. Maryland ranks 43rd in the nation on per-capita sales tax, and it is lower than some neighboring states. Virginia and West Virginia are at 5 percent, but tax groceries, which Maryland does not. Delaware has no sales tax.
O?Malley spokesman Rick Abbruzzese said thousands of job losses are not likely to occur.
“To the contrary, Maryland is set to gain 40,000 to 60,000 jobs from BRAC,” through military jobs moving to Maryland, Abbruzzese said. “The vast majority of Marylanders will pay less taxes” under the governor?s overall plan.
Click here to download the full study.
Join the discussion and take our poll in today’s examiNation Baltimore: How do you think a tax hike will impact you?
