Earlier this month, the Maryland Spending Affordability Committee projected that the state faces a $2.7 billion deficit for fiscal 2026. This official group makes revenue and spending estimates for the state. The group further concluded that the deficit would grow to almost $6 billion over five years [i] [ii]
Democratic Senate President Bill Ferguson of Baltimore said the state has “important decisions ahead to protect” the state against what he called “severe uncertainty at the federal level” while balancing the state budget. He told the Maryland Matters “Everything is on the table” when combating a budget gap. [iii] Ferguson’s statement apparently opens the door to discussing some kind of tax increase.
So what tax increases will Maryland Democrats be proposing? Thus far, Governor Wes Moore has not tipped his hand.
However, earlier this year, Maryland House Democratic Leader David Moon was very, very specific. He unveiled a detailed proposal to raise sales taxes by an average of $400 annually for each state resident. Moon’s proposal in the 2024 legislative session, HB 1515, would have expanded the transactions subject to the state sales tax to include many services. According to the non-partisan legislative fiscal note, by 2029, taxes would increase by over $2.9 billion. [iv] [v]
Although Moon’s HB 1515 proposes lowering the state sales tax rate from 6% to 5%, it would also expand the sales tax to cover many services that have not previously been taxed. These include:
- Accounting and financial planning services
- Legal and appraisal services
- Real estate services
- Shipping and delivery services
- Transportation, towing, and parking services
- Auto mechanic services
- Grocery delivery, gym memberships, personal training services
- Home repair and improvement services
- Home cleaning and mold remediation services
- Landscaping and tree removal services
- Dry cleaning and laundry services
- Nail salon, barber shop, and beauty salon services
- Veterinary and pet grooming services
- Advertising, public relations, printing, and media streaming services
- Funeral services
Among the opponents of the tax increase were the Maryland Chamber of Commerce and a coalition of businesses, local and regional chambers, and associations from across the state, which strongly opposed House Bill 1515. [vi]
“Taxing everyday services that Maryland residents and small businesses rely upon would have a devastating impact on Marylanders, the small business community, and our state’s economy,” said Mary D. Kane, President & CEO of the Maryland Chamber of Commerce. “While intended to raise education funding, HB 1515’s $2.9 billion tax hike will come directly out of the pockets of hardworking residents and small business owners. This massive cost increase will discourage businesses from expanding or relocating here and make Maryland far less attractive for people to live and work, severely undermining our competitiveness.”
Mike O’Halloran, state director for the National Federation of Independent Business (NFIB) in Maryland, said: “The General Assembly floated this exact same idea in 2020. The realities for small businesses now are the same as they were back then. They are operating in a decidedly unfriendly environment when it comes to the cost of doing business. Maryland ranks 45th for its business tax climate. Adding HB 1515 on top is untenable. The cumulative effect of recent policy decisions by the legislature cannot be understated — mandated sick leave, minimum wage hike, paid leave insurance and all the reporting requirements these and other recent laws have created. Maryland small businesses are looking for opportunities to grow, not be consumed with unfunded mandates, new taxes and red tape.”
Cailey Locklair, President of the Maryland Retailers Alliance, said: “A variety of aggressive tax increases have been proposed to pay for numerous unfunded mandates, including, at the last minute, this bill. We need to look at the math here; if you add all the proposed tax increases together on the table, they still don’t cover normal State government increases, the deficit, and all of the new costly policies coming online like education and green building standards. Marylanders are already feeling the squeeze with increased car insurance and massive property tax hikes — the will isn’t there to stomach more.”[vii]
The Maryland Republican Party weighed in with its own statement: “Democrat-proposed HB1515 will apply the Maryland sales tax to almost every service that the public uses, effectively increasing the amount of sales tax you pay by 50%. Costing Marylanders a projected $3 billion+ annually, this would be the largest tax increase in Maryland history. If the bill is passed, you will be taxed on every haircut, every Uber ride, every car or home repair, every pet sitting, every delivery, and ironically, even every time an accountant prepares your taxes. Not a day will pass that the Maryland Democrats are not taxing you for something.”[viii]
Other opponents include the Maryland State Bar Association (MSBA) and the Maryland Society of Accounting and Tax Professionals (MSATP). [ix], [x]
Delegate Moon’s tax hike proposal comes in the face of strong opposition from the general public. A February 2024 Gonzales Research poll found that nearly 60% of Marylanders oppose state tax increases to fund public projects.[xi]
Photo Credit: CleanSlateMoCo https://www.cleanslatemoco.com/about
[i] https://www.baltimoresun.com/2024/11/13/maryland-lawmakers-face-new-2-7b-budget-deficit-worst-situation-weve-seen-in-the-last-20-years/
[ii] https://www.washingtonpost.com/dc-md-va/2024/11/16/maryland-budget-deficit-cuts-spending/
[iii] https://marylandmatters.org/2024/11/18/ferguson-everything-is-on-the-table-to-address-budget-deficit/
[iv] https://mgaleg.maryland.gov/mgawebsite/Legislation/Details/HB1515?ys=2024RS
[v] https://mgaleg.maryland.gov/2024RS/fnotes/bil_0005/hb1515.pdf
[vi] https://www.mdchamber.org/2024/03/06/commentary-oppose-house-bill-1515-tax-on-services/
[vii] https://www.mdchamber.org/2024/03/06/oppose-house-bill-1515-tax-on-services/
[viii] https://twitter.com/MDGOP/status/1765810654525763802
[ix] https://www.msba.org/msba-protects-marylands-attorneys-and-firms-by-opposing-hb1515/
[x] www.msatp.org/maryland-society-of-accounting-and-tax-professionals-opposes-house-bill-1515-proposed-legislation-threatens-to-burden-practices-and-clients/
[xi] https://foxbaltimore.com/news/local/maryland-voters-reject-raising-sales-tax-to-fund-transportation-projects-in-new-poll-roads-bridges-mass-transit
Direct Line News is a Maryland-based free-access publication committed to the Republican reform tradition.
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