‘This Is a Big Proposal’: Sales Tax Plan Seen as Way to Fund Kirwan

House Majority Leader Eric G. Luedtke (D-Montgomery). Photo by Danielle E. Gaines.

As a group of lawmakers charged with ironing out the finer details of a multibillion-dollar education reform package met to discuss amendments for the first time Wednesday evening, the leader of Maryland’s House Democrats unveiled an expanded sales tax proposal that could pay for the whole plan.

House Majority Leader Eric G. Luedtke (D-Montgomery) is sponsoring a bill that would lower Maryland’s sales tax rate by one penny, but expand it to apply to most services in the state, which are currently untaxed. A fiscal analysis shows the measure is expected to generate $2.6 billion in increased state revenue by 2025, Luedtke said.

The goal is to fund the ambitious Blueprint for Maryland’s Future education reform bill, which would expand pre-kindergarten and career and technical education programs in the state, while increasing teacher pay and providing more resources to the state’s poorest schools. The reforms are expected to require an increase in state education funding of more than $2.6 billion annually by 2030, according to a fiscal analysis released Monday.

The tax plan was first reported Wednesday evening by The Daily Record.

“This is a big proposal,” Luedtke said in an interview Wednesday evening. “…But it has the benefit of paying for the entire Blueprint in one go. I think it’s worth serious consideration.”

Luedtke said he was driven to introduce the bill after hearing repeated conversations about revenue strategies among colleagues for the last several weeks. After realizing that broadening the sales tax base while reducing the rate could generate additional revenue, he drafted the bill to at least “spark a conversation.”

Luedtke’s bill will join a mix of large and small proposals seeking to increase state revenue to fund the Blueprint plan ― from legalized sports betting to increased tobacco taxes and new taxes on digital goods and advertising.

Similar proposals to expand Maryland’s sales tax have been introduced and failed before in the General Assembly. But the strong desire by Democrats to fully fund the Kirwan Commission proposals could push the measure forward in the 2020 session.

Members of the House Ways and Means and Appropriations education subcommittees proposed about a dozen amendments to the 172-page Blueprint for Maryland’s Future bill on Wednesday evening, but cast no votes on any changes. The subcommittees are expected to meet at least twice more to consider amendments, which could ultimately increase the price tag for the bill.

Some of the first amendments included expanding career and salary enhancement efforts to school psychologists and other education workers.

At a hearing for the reform bill on Monday, Senate President Bill Ferguson (D-Baltimore City) urged lawmakers to exercise caution as they amend the bill to avoid unintended increases or disruptions to the newly proposed funding formula.

Luedtke said he’s briefed a few members of the Maryland Senate about his proposal, but wasn’t sure Wednesday evening if the bill would be cross-filed in that chamber. He hopes to get his legislation through the House Rules committee on Friday and set for a hearing in early March.

Luedtke is the only sponsor listed on a draft copy of the sales tax bill, but other high-ranking leaders in the House of Delegates are said to endorse the plan.

Members of leadership at Wednesday evening’s subcommittee meeting declined to comment.

Business groups were already forming in opposition.

Mike O’Halloran, Maryland state director of the National Federation of Independent Businesses, said he was “frankly stunned” that such a big proposal would be introduced half-way through the 90-day legislative session.

“It’s a huge, huge impact for small business in Maryland,” O’Halloran said. “…It just increases the cost of doing business in the state of Maryland.”

The bill, he said, would require small businesses to pay for necessary professional services ― like payroll services and accounting ― that will increase costs for customers in the end.

“These are not all costs that small businesses can absorb — this will be passed down,” O’Halloran said.

But Luedtke said the current fiscal estimate shows the median Maryland household, which makes about $84,000 per year, will pay an extra $3 per week, including any trickle-down cost effects.

“Is it worth the price of a cup of coffee a week to make sure our kids have a world-class education?” he asked. “I think it is.”

The bill was applauded by education advocates supporting the Blueprint bill, which is based on recommendations of the so-called Kirwan Commission.

Joe Francaviglia, executive director of Strong Schools Maryland, said Wednesday that a change to the state’s sales tax structure is long overdue.

“We’re very excited that leadership is taking a serious approach to making sure Kirwan is fully funded this year,” he said. “We have the momentum, we have the energy. The community is behind it, public opinion is behind it, we have to get it done. This is a way to get it done.”

After the plan was unveiled Wednesday, a spokesman for Gov. Lawrence J. Hogan Jr. (R) said the administration intended to maintain its commitment to avoiding tax increases.

“The last time Maryland saw massive tax hikes like this, they wrecked our economy, and forced businesses and taxpayers to flee the state in droves,” said the spokesman. “Our legislators’ memories may be short, but Governor Hogan was elected ― and overwhelmingly re-elected ― to hold the line on taxes, and that is exactly what he is going to continue doing.”

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