Become a digitalPLUS subscriber. 99¢ for 4 weeks.
News Opinion Editorial

The $431 million payoff [Editorial]

The number of jobs in Maryland decreased by 9,800 in January. The statewide unemployment rate remains high at around 6 percent (compared to 3.6 percent at the start of 2008), and projected state tax revenues have recently been adjusted downward by $238 million. Balancing next year's budget has required some "creative" accounting in Annapolis, including dipping into money that was supposed to be set aside for state pensions.

Under those circumstances, a tax break might even be in order, but surely lawmakers would want it focused on creating new jobs, particularly for communities like Baltimore or the lower Eastern Shore where the unemployment rates still hover near the double-digit mark.

Yet what have the distinguished men and women of Annapolis produced? A tax break that applies only the wealthiest of Maryland residents — and benefits them only after they are dead, to boot. On Thursday, the Senate approved by a 2-to-1 margin a gradual lowering of the estate tax by raising its exemption, eventually causing it to be tied to the level used by the federal government, which was $5.25 million last year and is raised annually to match inflation. As the House has also approved the move, it's likely to be soon signed into law by Gov. Martin O'Malley.

Even at the current exemption level of $1 million, Maryland's estate tax only applies to the richest 3 percent of estates. So call this measure what it is: An aging millionaire's tax break that is supposedly going to cause them to stop retiring in Florida.

Right.

We will grant you that Maryland has become an outlier when it comes to taxing the deceased. Most states have followed the federal government's policy (as unwise as it may seem), and it would be prudent at some point to raise Maryland's exemption simply as a matter of fairness.

But why now? The "crisis" of a wealth exodus is greatly overstated. Maryland has the highest number of millionaires per capita in the nation. By and large, their manor homes and penthouses appear intact and inhabited. They still tend to pay a smaller percentage of their incomes in taxes than working people thanks to the magic of capital gains.

As the stock market has been going great guns in recent years (including a robust 29 percent gain for the S&P 500 in 2013), starvation does not appear imminent. By and large, most taxable estates don't pay more than a few percentage points of their value to Maryland's comptroller anyway. And even those widowed or unmarried sole proprietors with multi-million-dollar businesses always have ways to structure their estates to avoid problems for their heirs.

Will this tax cut create jobs? Let's say for the sake of argument the rich are the "job creators" that some claim. Will it cause them to stop retiring elsewhere and somehow spend more lavishly while they are living in Maryland? The only certainty is that it will cost the state a huge sum in tax revenue — an estimated $431 million over five years. We have observed no measurable jobs "dividend" in states that have chosen to lower their estate taxes.

It's clear that the estate tax cut, a measure previously backed primarily by Republicans in Maryland, has taken on a remarkable life of its own this year as some kind of offset for raising the minimum wage. Governor O'Malley more or less acknowledged that, issuing a statement in the wake of the estate tax bill's passage Thursday that he hopes "the General Assembly will now finish the work of giving Maryland a raise and increase our minimum wage to $10.10 an hour."

But it's a high price to pay for a minimum wage hike that most Marylanders already favor and Democrats claim to support. So let's put it to voters bluntly: If you had $431 million to spare, is a tax cut for the ultra-rich where you would spend it? What about a tax break for small business? Or for targeted investment? Or at least for a sales tax holiday that puts money in the pockets of ordinary people?

A shout out to Del. Heather R. Mizeur, the only major candidate for governor who has spoken out against the estate tax proposal as the wrong priority when middle class residents are dealing with cuts in the state budget. Why so few of her fellow Democrats in Annapolis share her view is a mystery — and one that voters ought to ask candidates for governor and other state offices between now and the June primary.

To respond to this editorial, send an email to talkback@baltimoresun.com. Please include your name and contact information.

Copyright © 2014, The Baltimore Sun
Related Content
  • A bad investment
    A bad investment

    Maryland's film industry employs a lot of good people, mostly highly skilled laborers. Because the state has been home to a string of television series over the years, of which "Veep" and "House of Cards" are only the latest, many of them have set down roots here and have contributed to the...

  • No major tax rollbacks?
    No major tax rollbacks?

    Senate President Thomas V. Mike Miller told some reporters this week what most State House observers have long suspected — we should not expect some sweeping reduction in taxes during the upcoming legislative session. He also produced a spirited defense of the tax increases approved...

  • Congress must create a level playing field for bricks-and-mortar businesses and online vendors
    Congress must create a level playing field for bricks-and-mortar businesses and online vendors

    During the next few weeks Congress will have the opportunity to pass e-fairness legislation, which will update our sales tax system and restore fairness to small businesses in our community.

  • Hogan's fiscal realities
    Hogan's fiscal realities

    When Republican Larry Hogan was elected governor this month, his platform was narrow and clear: Roll back as many of the tax increases of the last eight years as possible. When he made that promise, he knew he faced a $405 million shortfall in this year's budget and next year's as soon as he...

  • Senator displays his own arrogance
    Senator displays his own arrogance

    State Sen. Paul Pinsky writes an appropriately-named commentary condemning corporate lobbyists and maintaining that he and his fellow Democrats will fight against this "corporate victory" in the past election ("Post-election arrogance?" Nov. 14). That's funny. I was under the apparently...

  • Hogan's fiscal rhetoric meets reality
    Hogan's fiscal rhetoric meets reality

    When Gov.-elect Larry Hogan proclaimed the need for "strong medicine" to cure Maryland's fiscal state, he drew some jeers from the Democrats in Annapolis. The O'Malley administration bristled at the notion that he was bad-mouthing the incumbent governor's fiscal management. Sen. Richard...

  • Three big ways Hogan can save tax money
    Three big ways Hogan can save tax money

    Dear Larry —

  • Missing expectations
    Missing expectations

    Leading Maryland Democrats made several observations about Monday's write-down of anticipated tax revenues for this fiscal year and next that merit some parsing. Comptroller Peter Franchot opined that "we're experiencing the downside risk of an economic model that's predicated on federal...

Comments
Loading