Fitness club members, Realtors, restaurant owners, hotel operators, property managers ? the list of businesses opposed to Gov. Martin O?Malley?s increase in the sales tax and its expansion to other services went on and on at a hearing Thursday afternoon.
The number of people testifying in favor of the increase from 5 percent to 6 percent was very short: three ? a state employee union, and two nonprofit groups.
The sales tax increase raises about $700 million a year, the largest single chunk of the new revenues O?Malley hope to collect. “It is clearly a source we need to use,” said Henry Bogdan of the Maryland Association of Nonprofits.
“This is a rat and you ought to vote it rat down,” drawled anti-tax gadfly Robin Ficker, a former Montgomery County delegate who dropped pennies on the witness table as he testified.
Hundreds of Realtors demonstrated and visited legislators, protesting the expansion of the sales tax to property management services. “It could affect housing affordability” for renters, homeowner associations and condominiums, said Carole Maclure, president of the Maryland Association of Realtors with 34,000 members. Maryland already has the seventh highest rental rates in the nation, she said.
Maryland taxes real estate “from development to death,” Maclure said, with excise, transfer, property, capital gains and estate taxes. “Housing has already paid its fair share.”
“We find ourselves very dismayed to be lumped in” with so-called luxury services, such as tanning salons and fitness clubs, she said.
At the same joint hearing of the House Ways and Means Committee and the Senate Budget and Tax Committee, there was far more support for making the income tax more progressiveand raising the rates to 6 and 6.5 percent on the wealthiest 4 percent of taxpayers.
Baltimore County Executive Jim Smith said that if income taxes are increased and state support of education and health care are reduced, his only recourse would be to raise property taxes.
“This would be a disaster for Maryland taxpayers,” Smith said.
One voice of caution among local officials was Montgomery County Executive Isiah Leggett, whose constituents would pay more than 80 percent of the $160 million in additional revenues the income tax increases raise.
Leggett agreed that income taxes should be more progressive, but combined with local income taxes of 3.2 percent, 9.75 percent rate “creates a competitive disadvantage that will have long term consequences.”
“I question whether it is fair, reasonable or even sustainable,” Leggett said.
Much of the support for the O?Malley income tax “reform” was because it substantially lowers taxes for taxpayers making less than $30,000 a year, granting them a $50 tax credit against the sales tax increase and expanding the earned income tax credit. The O?Malley plan lowers taxes for everyone on the first $22,000 of income.
