Hundreds of thousands of Maryland households will pay more in taxes in 2019 because of the federal tax overhaul, according to Democrats in the state’s congressional delegation, who on Friday challenged Gov. Larry Hogan (R) to provide relief.
More Maryland residents — 87 percent, or 1.3 million households — deduct state and local taxes on their federal returns than any other state in the nation, an average of $12,930 per family. The new law caps those deductions at $10,000.
“Clearly, this tax overhaul is going to be a disaster for taxpayers in our state,” Rep. Steny H. Hoyer (D) told a group of municipal, business and labor leaders in Prince George’s County.
Because corporate tax relief in the GOP-passed tax law is permanent, while provisions helping individuals sunset in the next decade, lawmakers said the number of Maryland households seeing a tax hike will jump from 360,000 next year to 700,000 in 2027.
Sen. Chris Van Hollen (D) called the measure “really atrocious.” Said Rep. Anthony G. Brown (D): “Instead of tax reform, we got a tax scam.”
The state’s congressional delegation, with the exception of the lone Republican, Rep. Andy Harris, sent a letter to Hogan, offering to work with him in mitigating the impact of the new law.
“We understand that you are exploring ways to prevent increases in Maryland state income taxes due to the linkages between the state and federal tax code,” the lawmakers wrote, “but we would like to know if you plan to protect Marylanders from higher federal taxes as well.”
Douglass Mayer, a spokesman for Hogan, said the governor would introduce legislation in reaction to the new federal tax laws in the “next several weeks,” after he receives a report on their impact from state Comptroller Peter Franchot (D).
“The main issue is that state revenues are going to increase by between $500 million and a billion dollars,” Mayer said. “The governor’s plan is to introduce legislation to return that money back to those taxpayers… to hold all Marylanders harmless.”
Mayer added that the efforts by the congressional Democrats “seems a little disingenuous” because they have not called Hogan personally to discuss the challenges the new tax law presents.
“Our office has a plan and we want to know if they will support it,” he said.
At the meeting Friday with the congressional lawmakers, Prince George’s mayors expressed concern that the tax overhaul will hurt revenue, reducing their ability to provide local services. This is “foolishness, this is craziness,” said one.
A real estate agent predicted that first-time homebuyers will find reduced inventory, because “move-up” buyers will decide to stay put rather than purchase a home with a larger mortgage.
“They don’t want to live in West Virginia and commute,” Veera Phillips, president-elect of the Prince George’s County Association of Realtors.
Donald F. Kettl, former dean of the University of Maryland School of Public Policy, told lawmakers, “There’s probably no state in the country, border to border, more effected [by the tax changes] than Maryland. … The total amount of tax deductions lost in Maryland by this tax reform is $4 billion. Virtually every county in the state is going to be affected. This is a serious impact.”
Kettl said “early projections” suggest that property values will drop between 1.8 percent in Calvert County and 3.2 percent in Montgomery County next year. “For many people who have [their homes] as the largest part of their savings, they’re going to take a hit. Property tax revenue will drop, so the impact on [local government services] is enormous.”
How much the state loses in revenue, and whether localities see a loss in both state aid and direct taxes from homeowners, could take a year to determine, he said. “What we have is an incredible situation, where the impact is going to be huge.”
Hoyer again slammed Republicans in Congress for “rushing” though a tax bill without input from Democrats or the public, and for steering the bulk of the benefit to the richest Americans. He said the average middle class family, one earning $59,000 a year, would see the same benefit in a year ($1,182) that an earner in the “top 1 percent” would get in a week ($1,191). “We should have reversed that,” he said.
Hoyer said President Trump and his family “will be huge beneficiaries of the tax law changes, despite claims to the contrary.”
Harris’ office did not immediately respond to a request for comment.