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Supreme Court tax ruling means up to $2.5M less in revenue for Howard

Supreme Court
Supreme Court

Howard County officials expect to lose more than $2 million in annual revenue after the Supreme Court decided this week that Maryland residents have been paying too much in taxes on out-of-state income.

The court on Monday ruled 5-4 in favor of Brian and Karen Wynne, a couple formerly of Howard County, who challenged Maryland's policy of taxing the money they made outside the state. A majority of justices said the practice was unconstitutional because it interfered with interstate commerce.

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Howard County will collect between $2.2 million and $2.5 million less a year as a result of the decision, according to Budget Director Holly Sun.

That's far from the largest loss counties across the state will experience: In Montgomery County, officials expect to see tax revenues shrink by $24 million.

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The next-largest losses would fall in Baltimore County, at $4.5 million, and Anne Arundel County, at $3.6 million, according to state estimates.

The court's decision won't impact next year's budget by much, if it does at all, Sun said. The county factored the potential for a ruling against the state into its calculations for fiscal year 2016 by assuming the county would receive $2.5 million less in revenue next year.

The ruling means the county will also be responsible for paying refunds to taxpayers who filed a protective claim on the taxes they paid for out-of-state earnings. In Howard, between 2,300 and 2,500 taxpayers might ask for a refund, according to Gary Kuc, of the county's Office of Law.

Beginning in June of next year, the county will have to start paying back retroactive claims in nine quarterly installments. Sun estimated each installment would cost the county between $200,000 and $250,000.

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Since filing their lawsuit, the Wynnes have moved to Carroll County, according to Howard County Solicitor Margaret Ann Nolan. Kuc said Howard had never received the tax payments the couple was challenging.

Baltimore Sun reporters John Fritze, Luke Broadwater and Pamela Wood, and the Associated Press, contributed to this report. 

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