xml:space="preserve">
xml:space="preserve">
Advertisement
Advertisement

WASHINGTON — An attorney for a Howard County couple told the Supreme Court on Wednesday that Maryland law led to their out-of-state income being taxed twice, and argued that the unusual circumstance violates constitutional protections of interstate trade.

In a case that could wipe out tens of millions of dollars in county revenues, Brian and Karen Wynne say they should have received a credit for income they earned — and paid taxes on — in other states. Such a credit can be claimed on state income tax in Maryland, but not on the "piggyback" taxes that pay for county services.

Advertisement

"Maryland is imposing, by their own lights, $50 million in double taxation on its local businesses annually when they operate across state lines," argued Dominic F. Perella, an attorney for the couple. "This is a problem that only Maryland has."

William F. Brockman, the state's acting solicitor general, argued that Maryland has broad power to levy income taxes on residents regardless of where the income is earned. Brockman said state residents benefit from services paid for by those taxes, including public schools and police protection.

Advertisement
Advertisement

"There is no reason that a state should have to subordinate this power, this taxing power, just because another state … is taxing a portion of that income merely because it was earned within that state's borders," Brockman said.

"You don't get 18 percent of a firetruck or a day of school because you earned 70 [percent] — 82 percent elsewhere," he added. "You get 100 percent, just like your neighbor does."

The Maryland Court of Appeals sided with the family, and the state appealed the decision to the Supreme Court.

The case centers on the unusual way income earned in other states is treated by Maryland. States that levy an income tax typically offer credits for income taxes paid to other states, but Maryland collects both a state tax and a county tax, and treats credits for the two differently.

Advertisement

Residents can claim credits for income tax paid to other states only against the portion used to fund the state budget — not the part reserved for local governments.

The Wynnes, who earned income from a stake in a business that operated in several states, challenged their 2006 tax bill, and their attorneys argued that the state's credit rules led to some of their income being taxed twice, in violation of the Constitution.

The state appellate court put its ruling on hold while the Supreme Court considers the case. The state comptroller's office says it has received thousands of claims from taxpayers seeking refunds if the state court's decision stands. Counties could be on the hook to pay up to $190 million in refunds, according to estimates by state officials.

A decision is not expected before next year.

twitter.com/jfritze

Recommended on Baltimore Sun

Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement