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Lawmakers Look to Tax ‘Luxury Services’ After Sales Tax Bill Dies

House Majority Leader Eric G. Luedtke (D-Montgomery) and Del. Lorig Charkoudian (D-Montgomery) testify in favor of their bills that would expand the state’s sales tax to services. Photo by Danielle E. Gaines.

Hot on the heels of the death of a highly controversial bill to expand the states sales tax, the House Ways and Means Revenue Subcommittee is still seeking ways to pay for the Blueprint for Maryland’s Future.

“That bill was always only one option on the table,” Subcommittee Chairman and bill sponsor Eric G. Luedtke (D-Montgomery) said Thursday, the morning after the panel killed his proposal that was designed to fund all of the blueprint’s recommendations for reforming public education in Maryland. 

The now-dead, highly criticized legislation sought to lower the state’s sales tax rate from 6% to 5%, while simultaneously expanding the scope of taxable services.

Heard in the House Ways and Means Committee Monday, Luedtke’s bill received significant negative feedback from consumers and business owners alike.

“Recognizing the public’s concerns, we defeated the bill unanimously, bipartisanly and moved our revenue package in its place,” he said Thursday.

The package in question consists of eight bills looking to generating revenue by imposing a higher tax on tobacco products and implementing incentive programs for small businesses, to name a few of the proposed measures.

Also in that package is House Bill 1354, sponsored by Del. Lorig Charkoudian (D-Montgomery). If enacted, the legislation would impose a 6% tax on what the subcommittee has deemed to be “luxury services,” leaving those who can afford to live the high life to pay a little extra for things like:

  • Fur cleaning
  • Art brokerage
  • Swimming pool maintenance
  • Country club membership
  • Tanning parlors
  • “Non-veterinary pet care,” like dog-walking or grooming
  • “Social escort” — or, as Luedtke put it — “rent-a-date” services
  • Personal chefs
  • and lobbying, among others.

In a subcommittee meeting Thursday afternoon, Dels. Jason C. Buckel (R-Allegany) and Robert B. Long (R-Baltimore County) struggled with pieces of the proposed amendment, citing concerns around some of the bill’s taxable services.

Buckel said he isn’t sure that every one of these services could be considered “luxury,” noting non-veterinary pet care services as an example.

“All of these are going to have certain small business and consumer impacts,” he said. “We can’t support some of that, but I do appreciate everybody’s work in identifying some of these things would be problematic.”

Buckel and Long did successfully lobby to have “marina services” removed from the taxable list on the basis that people’s avoidance of the tax could create environmental problems and the occasionally blurred lines between “pleasure crafts” and small commercial fishing boats.

Had it remained, the amendment would have placed taxes on boat repair and maintenance services that happen at “pleasure craft” harbors.

At the meeting’s conclusion, Luedtke said that the projected revenue from Charkoudian’s bill based on an incomplete estimate from the Department of Legislative Services would rest around $75 million by fiscal year 2025.

He also said that should the complete package make it through the legislative process, it could net a very loosely estimated $600 million to $700 million within that time frame.

Charkoudian’s amended bill will go to the full Ways and Means Committee for consideration.

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Lawmakers Look to Tax ‘Luxury Services’ After Sales Tax Bill Dies