Anyone who supports the goals of the Kirwan Commission would have to be delighted with the results of the latest Goucher College poll — with one glaring exception. While a stunning 69% believe Maryland’s K-12 public schools are underfunded and a whopping 85% find teacher salaries too low, under results of the poll released Monday, about half of state residents believe they already pay too much in taxes. To be exact, 51% reported them as “too high,” while 44% believe them “about right.” How many of us are lining up to see their taxes increased? That would be the 3% who say taxes are currently “too low.” This kind of cognitive dissonance, a belief in two opposing ideas, is not terribly surprising when it comes to taxes (hated) and one’s children or grandchildren (loved). It’s not unlike health care and birthday presents. We want the best possible while paying the least possible. But there’s something missing from this particular equation: a realistic view of Maryland’s state and local taxes.
It has become a widely accepted belief, particularly in recent years, that Maryland is a veritable tax hell where hardworking people are shaken down by the state comptroller and tax collectors on the county and municipal level. Online surveys and quickie analyses that might only examine a handful of measures reinforce this perception. So do conservative politicians who benefit from the most dire view of Maryland’s fiscal circumstances. But while there are a number of measures of taxation that do legitimately cast the Free State in an expensive light, they seldom reveal the big picture. The bottom line? Looking at the overall state and local tax burden, Maryland is somewhere in the middle 60%, neither is it a top-10 high tax state nor a bottom-10 low-tax state. It is, for lack of a better description, somewhat middling tax-wise.
Here’s one of the best measures of that. The Tax Policy Center, a joint venture of the Brookings Institute and the Urban Institute, periodically adds up state and local general revenue as a percentage of personal income. This is a useful measure for several reasons. First, it’s a broad measure, so no state is hammered for an outlier rate (such as tobacco taxes); second, it considers state and local as one (states share the state-local tax burden differently); and third, it looks at the tax burden as an overall share of personal income (so Maryland doesn’t get penalized for its high-income households). Under this analysis, the truly high state and local tax states are, in order, New York, Alaska, Wyoming, North Dakota and Hawaii. The bottom five are Tennessee, New Hampshire, South Dakota, Florida and Georgia. And where does Maryland rank? At 38th. Right behind 37 other states.
This doesn’t let Maryland off the hook when it comes to taxes. There are surely certain taxes and fees that ought to be adjusted lower, if possible, because they place an unfair burden — perhaps on working class families or single-parent households or fixed-income retirees, for example, who can’t afford them. And we should always be looking for greater government efficiency. But when it comes to considering whether state government should pay more for better schools in Maryland, the debate should not start with the assumption that the tax burden is already astronomical. Yes, there are some taxes that are relatively high compared to other states — the income tax most conspicuously (and that’s a topic for another day). But there are any number of taxes and fees where Maryland is relatively low. Among states that collect sales taxes, for example, Maryland’s 6% rate is hardly backbreaking. Remember Tennessee, the state with the low taxes? On sales, it’s far ahead of Maryland with a top sales tax of 9.53% when state and local rates are combined, the highest in the nation.
The people of Maryland would like to have better public schools, and they agree that greater state funding, including tax dollars for higher teacher salaries, is at least part of the way to achieve that result. Public disdain for taxes is a given. It’s like opposition to higher prices of any kind. Yet people ultimately accept the price if they believe they are getting return on investment. How best to pay for Kirwan? That’s the real question remaining before members of the General Assembly. And it’s one that deserves a robust debate, but starting with a realistic view of the state’s complex tax situation.