In 2008, Maryland enacted a temporary change to its income tax in order to compensate for revenue lost from repealing a law subjecting computer services to the state’s sales tax. The income tax change in question, which expired at the end of 2010, 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.
This so-called “millionaires’ tax” affected fewer than 5,000 Marylanders — or less than one percent of all taxpayers in the state — yet in 2010 the Department of Legislative Services estimated that it could have raised nearly $70 million in fiscal year 2012 if it had remained in place. With Maryland staring down a significant budget gap for FY2012, failing to reinstate the tax 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 reinstate the millionaires’ tax.
1. Maryland’s tax system is regressive — especially without the millionaires’ tax.
2. The millionaires’ tax did not lead to an exodus of wealthy Marylanders.
3. Wealthy Marylanders have reaped the benefit of a decade of federal tax cuts.
4. Reinstating the millionaires’ tax would increase the amount of economic resources available in Maryland.
5. Reinstating the millionaires’ tax would more fully compensate for the revenue losses resulting from the repeal of the computer services tax.