In 2008, to compensate for the anticipated loss of revenue due to the repeal of a law subjecting the provision of computer services to the state’s sales tax, Maryland enacted a temporary change in its income tax. That change, which is in effect only through the end of this year, created a new top income tax bracket, with a rate of 6.25 percent applicable solely to net taxable income (NTI) in excess of $1 million.
At present, this so-called “millionaires’ tax” affects fewer than 5,000 Marylanders – or less than one percent of all taxpayers in the state – yet generates close to $100 million in annual revenue. As Maryland’s projected budget deficit for the coming fiscal year – FY 2011 – currently stands at roughly $2 billion, allowing the tax to expire at the end of the year would impair the state’s ability to educate its schoolchildren, to ensure public safety, and to make the investments necessary to foster economic growth. The following details five additional reasons Maryland policymakers should preserve the millionaires’ tax.