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Tax Reform Bills Die

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Maryland State House Dome

A package of bills to restructure Maryland's tax code falls victim to the state's improving fiscal picture

As crossover day--the deadline for bills to cross over from one chamber of the General Assembly to the other--passed Monday, a package of bills a coalition of House Democrats touted as creating a more equitable tax structure in Maryland was missing.

The coalition abandoned the bills after Senate leaders warned them away.

The bills, unveiled at a late January news conference, would have restructured Maryland’s tax brackets so high-income earners would pay more and lower income earners would pay less. They would have closed what advocates call corporate tax loopholes and ended a tax exemption for estates between $1 million and $5 million.

They all had hearings in the House Ways and Means committee and were never seen again.

Del. Eric Luedtke, the House majority leader, said the bills, reworked versions of measures that passed the House last year but ran into trouble in the Senate, would have the same problem this year.

“Our sense from the Senate is, you know, they didn't move those bills last year, they're not likely to this year,” he said.

So, House Democrats decided to concentrate on “other bills that do have a chance of passing both chambers,” Luedtke said.

He wouldn’t go into detail but noted that to pass any bill you need majority votes in both chambers and the governor’s signature.

“And if you don't have the governor, you need a veto proof majority. And that's difficult to get to on some bills.”

He said the House is moving other bills aimed at changing the tax code, including one that encourages people to blow the whistle on tax cheats.

“The IRS has used that to great effect to catch people who are, you know, trying to try to hide the ball on their taxes,” he said.

Sens. Guy Guzzone and Jim Rosapepe, chair and vice chair of their chamber’s Budget and Taxation Committee characterized the bills as unnecessary tax increases when the state is flush with money. Guzzone said Maryland is getting “an enormous amount of resources” from the federal stimulus bills.

“We are in better shape financially than we could have possibly hoped to be,” he said. “And based on that, I think the focus has really been on spending those resources correctly, to ensure that we help the most people.”

He said state fiscal analysts had been predicting a deficit through fiscal 2026. But with the federal stimulus money and an improving economy, that deficit is now looking like a $200 million surplus.

Rosapepe said governments only look at raising revenue when they need revenue.

“At this point, our biggest need is to beat the virus, and to make sure that federal money we're getting is spent well, to help people get back to work to help the schools open, help businesses open,” he said. “And so, I think that's where the focus is, as opposed to major changes in the tax system.”

It’s not as if the Senate hasn’t moved tax bills, he argued. The chamber overrode Gov. Larry Hogan’s veto of the tax on big tech companies, passed a bill of his to close some corporate tax loopholes and another to allow county governments to make their local income taxes more progressive.

“So we're working to try to, you know, relieve the tax burden on working people and close loopholes and make sure that high income people, big corporations pay their fair share,” he said.

But Del. Vaughn Stewart, a Montgomery County Democrat and a member of a group calling itself the Fair Funding Coalition, denied the bills represented tax increases.

“Under the Fair Funding Coalition's kind of slate of bills, there wasn't a single one, that would have increased taxes on regular Marylanders, working families, middle class families,” he insisted.

He said some of the bills would be better characterized as closing corporate tax loopholes, rather than tax increases. But he conceded that others could have raised taxes on the wealthiest Marylanders.