Latest Projections are Strong Argument against Tax Cuts

Yesterday’s significantly lower projections by the Board of Revenue Estimates mean proposed reductions in Maryland’s estate tax and corporate income tax ought to be abandoned by legislators. Maryland can’t afford the cost and still do everything needed to build a strong economic future for the state.

According to yesterday's press release from the Comptroller's Office, the BRE decreased expected revenue collections for the current state fiscal year and the next one by $237.8 million, mostly as a result of lower projections for the personal income and sales taxes. Since the Governor's proposed budget is balanced using BRE's December estimates, this latest revenue write-down creates a gap that must be closed before the legislature can pass a balanced budget next month.

 Source: Board of Revenue Estimates (click to enlarge)

 Source: Board of Revenue Estimates (click to enlarge)

It would make sense for legislators looking at yesterday’s numbers to reject proposals to slash revenues further by cutting the corporate income tax or estate tax. Yet measures to do both are still receiving serious consideration. These proposed tax cuts would save the very wealthy and large, profitable corporations money at the expense of average Marylanders. The state would have to make up the difference by reducing its commitment to invest in schools, transportation, hospitals, safe communities, and the other building blocks of economic growth and job creation.

Instead of these money-losing proposals, Maryland needs to find ways to increase revenue and restore support for important services that have stagnated or fallen behind as Maryland families continue to struggle.

Sensible options are available that would avoid damaging cuts to crucial services for vulnerable Marylanders, like Medicaid and child care subsidies, and threaten economic recovery. These three proposals would provide $247.5 million:

• Increase tobacco taxes as proposed in the Healthy Maryland Initiative (HB 443/SB 589), raising $110.8 million in General Fund revenue in the coming fiscal year. 
• Reduce $106.7 million in state funds for personnel and administrative expenses in state agencies as recommended by Department of Legislative Services. 
• Reduce the General Fund allowance for Debt Service by $30 million due to anticipated proceeds from sales of bond premiums, also recommended by DLS.  

(click to enlarge)

While the personnel and administrative cuts include cost-containment choices within state agencies, state employees would still receive a full-year one percent general salary increase, several health insurance premium holidays, and merit pay increases that become effective throughout the year. HB 443/SB 589 includes a requirement that the Governor use at least $21 million of the new revenue to fund tobacco use prevention and cessation programs starting in the 2016 fiscal year.

Click here for a spreadsheet from the Comptroller's Office with the new revenue estimates and check back here for updates as the legislature continues to work to pass the budget.