Throughout the campaign season, Democrats across the state have proposed bold initiatives, such as building an east-west transit line in Baltimore, universal pre-K, investments in renewable energy and more. While these ideas have the potential to positively impact the state, they will need to include funding mechanisms in order to comply with the state’s balanced budget requirement.
Fortunately, using other states as an example, Maryland still has room to raise significantly more revenue. A study from the Tax Foundation found that Maryland collects approximately $6,500 in state and local taxes per resident. Meanwhile, Massachusetts, Connecticut, New York and D.C. collect $7,000, $8,500, $9,800, and $11,300, respectively.
Comparing Maryland to these states, one of the most obvious differences is in state income tax rates. A single filer earning $200,000 a year in D.C. pays about $15,000 a year in state income taxes. In Maryland, they pay only $10,000. PolicyEngine, a free web app that computes the impact of public policy, demonstrates how even small increases in Maryland’s income tax rates could raise a substantial amount of revenue. Raising the middle income brackets by just 0.25 percentage points and the top income brackets by 0.5 percentage points would generate $748 million in annual revenue. This could potentially fund the east-west transit line in just 15 months or lift thousands of children out of poverty by delivering a monthly payment to parents. Under this tax change a family of four earning $50,000 a year would pay an extra $74 per year in taxes. A married couple earning $200,000 a year would pay an extra $578 annually. You can see how this plan would impact your own taxes by following this link (https://bit.ly/3SxtgOb) and entering in your household information.
Of course Maryland has many options beyond raising income tax rates to generate revenue. Raising the sales tax rate one point could raise $650 million a year. Replicating Massachusetts’ vehicle tax could add $800 million in new revenue annually. Maryland could also repeal the exemptions that complicate our tax code and cost the state nearly $6 billion annually (enough to provide each Maryland resident with a $1,000 annual dividend). We could start by ending the sales tax exemption on residential energy use, which is mostly a tax break on fossil fuels, or by ending itemized deductions, which are essentially just tax loopholes for the rich. Each of these exemptions costs the state hundreds of millions of dollars a year.
Instead of replicating the revenue raisers of other states, Maryland could also choose to be a leader with more efficient taxes. A land value tax could generate billions of dollars for the state, while positively impacting the economy. A carbon fee, a policy that charges polluters for their emissions and is supported almost unanimously by economists, could raise revenue and bring Maryland closer to its statewide emissions targets.
Nearly all the taxes listed above would be extremely progressive, meaning the rich would pay a far larger price tag than middle and lower income folks. Still, it is unsurprising that Democrats have not campaigned on pay-fors for their plans. Tax increases are Republicans’ favorite point of attack, and nobody wants to add fuel to that fire. But there is only a small window between the end of the election and the start of the 2023 session, and if Democrats want to turn their campaign promises into actual policy, they’ll need real plans to generate more revenue for the state.
Nate Golden (email@example.com) is a teacher in the Baltimore City Public School System and president of the Maryland Child Alliance, an advocacy organization fighting to reduce and eventually eliminate child poverty in the state of Maryland and beyond.