State budget analyst: fearful federal workers, the elderly, struggling families buying less in Trump era

State analysts said Wednesday that fearful federal workers, the elderly and struggling families are buying less than expected this year, reducing state sales tax receipts by about $72 million.

That trend was the biggest contributor to a $53 million revenue write down the Board of Revenue Estimates approved Wednesday.


The state's chief revenue forecaster blamed President Donald Trump's budget-cutting rhetoric for causing economic trepidation among the state's large federal workforce.

Andrew M. Schaufele, executive secretary of the Board of Revenue Estimates, said federal workers "are surely adopting a defensive spending posture."


Paychecks from federal workers and non-defense contractors constitute about 15 percent of all of Maryland's income tax withholding each year, he said. While that figure was not affected by threats to shrink the federal workforce, Schaufele said Maryland's federal workers have reacted by spending less.

He also cited three other factors as contributing to the lackluster spending:

  • Tax data shows the median family income in Maryland has largely remained unchanged over the last decade, and families facing inflation appear to be spending less.
  • A growing population of aging baby boomers are also switching their spending habits, reflected in data that shows less spending on clothes and more on medications.
  • Millennials new to the workforce whose spending would otherwise compensate for the boomers’ withdrawal instead make many of their purchases online, which is often not taxed.

The spending dip represents a small piece of the roughly $4.6 billion Maryland collects in sales tax each year, and an even smaller fraction of the state's annual $17 billion overall tax collection.

Board of Public Works voted today on $63 million in budget cuts proposed by Gov. Larry Hogan.

Maryland's revenue is growing by less than 3 percent a year. The revenue estimates, which are derived by consensus from a group of state experts pouring over data, demonstrate that's no boon for state coffers.

"We may be growing slowly, but we are growing," said Bernadette T. Benik, chief deputy treasurer.

Part of the loss of sales tax revenue was offset by gaining $15 million more than expected from lottery sales and $41 million more than expected from various business, insurance and estate taxes. A few other revenue sources also declined, including a $10 million reduction in anticipated tobacco taxes, which analysts said was due to a decline in smoking and shift toward vaping and e-cigarettes, which are not subject to the same tobacco taxes.

Earlier this month — at Republican Gov. Larry Hogan's urging — the Board of Public Works trimmed $63 million from this year's budget. Hogan and Comptroller Peter Franchot, who along with Treasurer Nancy Kopp sit on the Board of Public Works, said they wanted to build a financial cushion.

"Clearly, as we sit here today, that looks even more prudent," Hogan's deputy budget secretary Marc Nicole said Thursday. He noted that between the current year and next year, Maryland's anticipated revenue will fall short by $126 million — a gap the state constitution requires policy makers to close.

Nicole said the early budget cuts "will allow us to better spread out the shortfall." He said no further mid-year budget cuts were being discussed, and he did not expect that to change unless revenue estimates dropped again.

Franchot, a Democrat, said that the state's slow tax receipt growth was "the new normal" and urged "fiscal restraint" from public officials.

"We must avoid decisions that will take more money out of the pockets of Marylanders," he said.


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