Democratic gubernatorial challenger Ben Jealous attempted to lay claim to the mantle of tax-cutter Thursday when he vowed at a Baltimore news conference to seek a cut to the state’s sales tax if he is elected.
The proposal to lower the 6 percent tax to 5.75 percent is part of what Jealous is billing as his “Innovation Maryland” economic growth package. The plan goes further than any tax-cutting measure Republican Gov. Larry Hogan has suggested since his 2015 proposal to roll back a 2013 gas tax increase. That measure gained no traction in the General Assembly and Hogan hasn’t tried to revive it.
Jealous unveiled his economic plan at a news conference in Hampden, where he charged that Maryland’s job growth has lagged behind that of all neighboring states under Hogan’s Republican administration.
“I have a vision for making sure our economy gets growing again and we put more money back in the pocket of working people — that we invest more in small and growing businesses,” Jealous said.
The proposal could help inoculate Jealous against Republican warnings that his ambitious plans to expand social programs could lead to massive tax increases on ordinary Marylanders. But it could also raise questions about whether Jealous is proposing to give away revenue he would need to finance his plans.
Hogan campaign spokesman Doug Mayer struck back.
“If you didn’t have whiplash from the velocity of Ben’s out-of-control spending, you’d have it now as he wildly goes from wanting to raise the sales tax yesterday to promising to cut it today," Mayer said. “There is no one in Maryland who believes that Ben Jealous will be better for their tax bill than Larry Hogan, but it is clear that Ben has reached the point of desperation where he will say anything to get a vote.”
Jealous contends he has never proposed a sales tax increase. But his previous statements show that he has identified the sales tax as a possible source of increased revenue to finance his centerpiece Medicare for All health care plan.
Jealous did not rule out a sales tax increase when asked about it at the news conference, saying such a discussion would be two to three years away.
“It’s a hypothetical possibility that a panel created next January might, two years from now, consider possibly several options, which might include, maybe, a sales tax increase,” Jealous said to laughter.
The campaign had said previously that Jealous has taken sales tax increases off the table as a potential funding mechanism for his health care proposal.
Jealous’ sales tax plan estimates, based on a Department of Legislative Service analysis, that a cut of a quarter point in the sales tax could cost the state $175 million to $193 million in revenue each year.
Jealous said he would offset that revenue loss through increased collections of sales taxes from online retailers and by closing an income tax loophole benefiting hedge fund managers. The estimates his campaign posted for those revenue sources combined vary widely and could fall tens of millions of dollars short of making up the revenue.
Mayer said that by looking to the online sales tax revenue to offset his proposed tax cut, Jealous would be tapping into money that Hogan intends to put toward education — in particular the potentially expensive expected recommendations of a commission currently studying Maryland’s school financing formulas.
“Ben Jealous has been on record repeatedly saying that he will fund education first, if that’s the case, why is he willing to forgo this revenue now?” Mayer said.
According to the Jealous campaign, the expected bump in sales tax revenue could range from $50 million to $150 million.
At his new conference, Jealous downplayed the online tax proposal and repeatedly talked up his idea of closing a loophole benefiting hedge fund managers.
“Why should Main Street be subsidizing a lower tax rate for hedge fund managers?” he said.
Jealous said a sales tax cut would keep Maryland’s tax rate competitive with nearby states. According to legislative analysts, the move would bring Maryland even with the District of Columbia. But most of Maryland’s neighbors have state and local sales taxes of at least 6 percent when combined.
Maryland does not permit local sales taxes.
The state’s rate was 5 percent until Gov. Martin O’Malley sought an increase to 6 percent in 2007 — largely to help fund an education aid formula the General Assembly adopted in 2002.
The sales tax is the state’s second largest source of revenue for its general fund after the personal income tax.