Repealing the sales tax on computer services makes sense. But taxing millionaires to replace the lost revenue is about as logical as going to war to reap economic boom.
This exchange only shifts the burden; it does not help to stimulate the economy as legislators and the governor claim. This is especially so because many entrepreneurs who would have been hit by the computer services sales tax will now see their incomes drained through another route.
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It also does not just affect “the rich.” It affects everyone those millionaires could have hired but can?t and everything they would have bought but don?t. Fewer cars sold, lattes sipped and charity checks cashed mean less wealth all around, not just for those who will see their state income tax rate rise 32 percent in the past six months from 4.75 percent to 6.25 percent on income over $1 million.
Legislators argue the extra $17,000 the average filer in this bracket will pay each year in taxes is not enough to prompt a move across the Potomac. Maybe not ? especially in this real estate market. Yet one hard fact is the rich can take a hit and move on, taking whatever value they add to the economy with them.
Anyway, even if our governor and legislators think the rich are trapped, that thinking is shortsighted. Maryland?s growth depends not just on those who live here, but those who choose to live and to start businesses in Maryland in the future. Combined with the state?s local income taxes, the rate surges to 9.45 percent in Montgomery and Howard counties for those in that income bracket. Prince George?s and Baltimore City are right behind at 9.35 percent and 9.3 percent.
According to the Tax Foundation, only California and Vermont demand more than Maryland from high earners. Virginia?s (5.75), Delaware?s (5.95), Pennsylvania?s (3.07) and West Virginia?s (6.5) income taxes are way below Maryland?s.
And it?s not as if Maryland can advertise its low sales tax or corporate income taxes as a tradeoff. Those all are high, too.
And the capricious swapping of one tax for another can only strike fear in other victim groups who can only wonder: “Who?s next?”
Gov. Martin O?Malley, who supported the tech tax before finding a less desperate, less vocal and smaller group to skewer, would serve all Marylanders well by outlining his vision for a fair tax system and sticking by it.
That would help to prevent random acts of taxation in future legislative sessions and show members of the business community the state wants to foster the kind of stable tax climate they need to thrive.
As we know from experience, proximity to Washington does not prevent recessions. But high taxes can hasten their appearance and length.
