The tax increase passed by Maryland’s Democratic legislature has driven out of Maryland a business owned by one of the Democratic legislators. Maryland Matters reports:
Del. Brian M. Crosby (D-St Mary’s) is vice chair of the House Economic Matters Committee — a panel that handles many business issues — as well as the owner of a small business that is a subcontractor on Defense IT contracts.
Until last week, that business was based in Maryland.
But anticipating a big tax increase on his business, Delegate Crosby was
in the process of moving his business to Virginia last week when the governor and legislative leaders announced a budget deal that includes a 3% tax on IT, among other services, a tax that critics say poses an existential threat to businesses such as Crosby’s that contract with federal agencies….“I’ve raised these issues,” Crosby said. “I don’t know what to say. I think people are still convinced that you’re getting 50 cents of $1 or something.”
Instead, he said the tax would mean businesses such as his would lose money on every transaction. “All I can say is you’re not taking 50 cents on $1,” Crosby said. “You’re taking $1.50 from $1.”
Crosby told his story Tuesday, minutes after his Democratic colleagues muscled through a two-bill spending plan on a preliminary vote. That plan includes the tax on data and IT services that is expected to raise nearly $500 million annually, part of $1 billion in new revenues…
Crosby noted the irony of the situation. Gov. Wes Moore (D) and other legislators say they want to grow private industry and attract IT jobs to the area.
The tech tax is not the only tax increase Maryland is imposing. The state is also increasing the capital gains tax on all citizens by 2%, and is adding two new higher tax brackets for households making over $500,000 or $1,000,000. “Those who make $500,000 per year will be taxed at 6.25%, while those making $1 million will be taxed at 6.5%. Currently, Marylanders who make over $250,000 are taxed at 5.75%.”
Those state income taxes are in addition to local income taxes levied by cities and counties in Maryland. For example, Maryland’s Montgomery County has a 3.2% income tax on its residents.
While progressive Maryland is raising taxes, despite being a wealthy state that could make do with less tax revenue, states that were historically poorer than Maryland are managing to cut taxes. Mississippi’s legislature recently voted to gradually phase out state income taxes. Arizona has cut its top income tax rate from 4.5% down to 2.5% over the last decade, attracting wealthy retirees who pay more in taxes than they consume in government services.
