Cyber Monday highlights need for internet sales tax

After the travel, after the turkey and stuffing, and after the Black Friday (or is it Thursday?) sales, comes Cyber Monday. In the days before widespread home internet access, this was the day when shoppers returned to work after Thanksgiving and began their holiday shopping online using their employer’s internet connection. Nowadays, it is a great opportunity for retailers to generate nearly $1.2 billion in sales nationwide.

However, from a state perspective Cyber Monday is a lost opportunity to collect funds necessary to provide vital services. When consumers purchase goods from brick and mortar stores in Maryland the retailers collect the sales tax and remit it to the state. Yet when a Maryland resident makes an online purchase, the resident is responsible for remitting the tax to the state, which few do. Remitting the tax on these purchases falls to the consumer because online retailers without a physical presence in Maryland are not required to collect the tax. According to some estimates, this cost Maryland upwards of $164 million in lost tax revenues.

While federal action would be required to allow Maryland to collect all $164 million, in a June 2011 report Neil Bergsman highlighted two things Maryland can do to increase the tax collection rate for online purchases:

• Change the law to require online retailers with Maryland affiliates to collect state sales tax. This should apply whether the affiliate is an individual or a subsidiary company.
• Add a line to its state income tax form to help consumers remit their use tax once a year, as the vast majority of states have done

In the upcoming legislative session, Governor O’Malley and the General Assembly will have to figure out how to plug a roughly $1 billion shortfall in the FY 2012 budget. Given the significant cuts made to services over the past several budgets, and the loss of federal stimulus dollars, MBTPI encourages a balanced approach to closing the budget gap that includes revenue enhancements such as collecting online sales taxes.

Thanksgiving dinner is not a sure thing for 1 in 8 MD households

Thanksgiving is right around the corner, and for many of us that means looking forward to a big dinner with family. Yet for 1 in 8 Maryland households Thanksgiving is just another day spent struggling to put food on the table.

Between 2008 and 2010 an average of 12.5 percent of all households in the state were food insecure, meaning they struggled to pay for enough quality food for every member of the household at some point during the year. Of those 276,250 households, almost 41 percent had “very low” food security, meaning that they had to skip meals or otherwise significantly reduce their food intake at some point during the year due to a lack of resources.

Unsurprisingly, the Great Recession has had an outsize effect on hunger in Maryland. The share of households that were food insecure averaged 8.6 percent in the three years prior to the recession, essentially unchanged from the 8.7 percent average between 1996 and 1998. Since the beginning of the recession and after its official end in June 2009, the average share of households who were food insecure jumped roughly 45 percent.

Funding is threatened for state and federal programs that fight hunger every day. These include the Supplemental Nutrition Assistance Program (SNAP, formerly “Food Stamps”), the Women, Infants and Children (WIC) program, school lunch and breakfast programs, and senior nutrition programs like congregate meals. As the state economy fails to recover, the demand on these programs continues to grow. Here is our earlier report on the exploding number of SNAP recipients.

The increasing number of hungry Marylanders is a sobering reminder that the governor and General Assembly need to take a balanced approach to balancing the FY2013 budget. Further cuts to services will have real consequences for struggling families. The state should make strategic use of new revenue streams to maintain the strength of Maryland families.

Name the Blog!

We are looking for your input on the name of this blog. 

When we started it, I decided to call it “Maryland Budget Items.” I thought this was a particularly clever choice, because “items” refers to news items as well as line items in a budget. 

I've heard from some people, however, who do not love this name like I do.

Okay, I can take it. And maybe we can do better? So...

I’m asking you to suggest a new name. In fact, we’re holding a contest! The winner will get not only satisfaction, but a few freebies... a good thing in this economy! 

Of course, you might vote to keep the blog title the same... if “Maryland Budget Items” wins, we'll draw one of your names out of a hat. Either way, the winner* gets lunch with me at a trendy spot in Federal Hill or beautiful Annapolis, and a keepsake mug (*unless you’re a state elected official; then we can’t give you anything because of the ethics laws, and the prize will go to the runner-up).

We’ll accept your nominations through December 9, and then we’ll send you instructions on how to vote. To suggest a name, simply comment to this blog post (or email me if you're shy).

Thank you!

The Time is Right to Reinstate the Millionaires' Tax

Maryland is now leading the nation in number of millionaires. (See the AP story printed in the Baltimore Sun, and more coverage about our state's standing and the millionaires' tax in the Gazette of Business and Politics.) A rate change back to prior levels is needed, it would produce substantial revenue, and it shouldn't be feared.

Having assets greater than one million isn’t the same as having an income that exceeds one million, and therefore, the pool of “millionaires” to be taxed at a higher rate would be much smaller. Still, we are a wealthy state, and we have many residents capable of contributing more fairly.

Will we drive them out by a small increase in their tax obligation? Not if past experience is a guide, as the Center for Budget and Policy Priorities has detailed in a recently released study, and as was found in New Jersey after it implemented a millionaires' tax

If we reimpose a millionaires' tax, we can expect to reap about $87 million dollars each year.

Last year, MBTPI wrote a policy paper about this issue, and the points made then remain valid today.

This is the right time to get our state's wealthiest to help pay for the quality of life, education, and other benefits that are at risk if we resort to more cuts rather than reasonable revenue raising.

New momentum for new revenues

The state legislature’s recent Special Session was punctuated by talk about how to grow our economy, help create jobs, and meet the needs of Marylanders. This is not an easy task, but it is possible if we take  a balanced approach that includes revenues instead of a cuts-only approach that puts our economy in jeopardy.  If we want to attract and create new jobs, we need to invest in our schools, repair our roads and bridges, and keep our communities safe, and we can only do this with new revenue.

Recently, I’ve been encouraged by a handful of articles that show some momentum in the fight for a balanced approach that includes new revenue.   I  want to share a few with you today:

•         The MarylandReporter discusses a number of sources of revenue:

•         The Gazette forecasts an ongoing focus on revenue in the state legislature 

We have also seen lots of attention on the growing income disparity in our country.   As more people speak out on this issue, we have a unique opportunity to look at how our tax system has favored the wealthy in recent decades and how we can help protect middle- and low-income families who are struggling amid the weak economy.  A balanced approach to our country’s finances, including new revenues rather than a cuts-only strategy, is the best way to help lift our economy and improve the lives of average Americans.     

Here are a few news items that highlight these issues:

•          A piece about top earners more than doublingtheir share of American income.
•          A graphic showing income distribution over thelast thirty years.
•         An article with split opinions from millionaires about a potential surtax.

Maryland revenue needs are on legislators’ minds, but not on special session agenda

Maryland’s 188 legislators are now meeting in special session to draw new lines for the state’s eight Congressional districts. Final census counts were released in the spring, and they must decide the new district boundaries in time for candidates to file in January for the primary elections in April.

This would have been a good opportunity to get a head start on fixing Maryland’s future revenue shortfalls.

Once the legislature is in special session, it may consider bills related to anything. Earlier in the year, there was speculation that the special session would consider some new revenue measures. Now, however, that appears unlikely.

That’s too bad, because even though Maryland’s state budget is balanced through June, 2012 -- and there has been a bit of good news about revenue collections rising --in fact the cushion is thin, and new revenue shortages are looming in the next fiscal year.

Projected revenues for 2013 will be at least $500 million short – and maybe a lot more than that -- of what’s needed to fund the existing level of state services.

And keep in mind, the existing level of services already is much less than it used to be. Cuts of $5 billion over the past 4 years are jeopardizing public education, local transportation, healthcare funding, child care, and much more. They hurt the state’s ability to create jobs and build a strong economy.

That’s the reality that legislators will face in January when they come back to Annapolis for their regular session.

The Governor has signaled that he will propose an end to the cuts-only strategy and offer a balanced approach that includes revenue. A recent Gonzales poll found that 64% of likely Maryland voters support some combination of revenues and cuts – far more than favor a cuts-only approach.

There are sensible options for raising revenues, One is to reinstate the three-quarters of one percent tax on income over one million dollars that expired in 2010. Another is to plug loopholes in the corporation income tax that allow multistate companies to hide their profits from Maryland taxes.

The Governor and legislature should at least think about these measures while they are in Annapolis for the special session. Even better, they can talk to each other and their constituents about the serious damage that will come with further service cuts. They can identify the best options for adding revenue as part of a balanced approach. Then, when they come back in January, they should pass the bills to enact them.

My Visit to Occupy Baltimore: Listening to the Occupiers and Thinking about Fair Taxes

The million-dollar tax bracket is on the table – it should go back onto the books

People in Maryland and across the nation are angry and frustrated with the continued lack of jobs in the US economy. The “Occupy WallStreet” protest will soon be entering its fourth week.

I visited Occupy Baltimore on Friday, its third day in the city.  The folks there say they are prepared to continue their protest for the long haul. They are upset that ordinary people can’t find jobs, while big banks and oil companies are earning record profits. They are upset that these big businesses and the richest 1% of individuals get tax breaks while ordinary Marylanders suffer from cuts in vital services. 

They also point to many other problems: racial double standards in the criminal justice system, the lack of affordable housing, members of Congress and other public officials who are out of touch with struggling Marylanders. There is a gusher of dissatisfaction.

I asked some of the protesters, “What do you want to have happen as a result of this demonstration?” The answers were “I want change.” And “I want the big banks to give us our money back.” They have a sense that neither prosperity nor sacrifice are being shared equitably, that corporate executives and investors are enjoying a recovery while the great majority of ordinary Marylanders remain in an extended recession.

They are right.

The Capital News Service recently ran a story by JeffBenzing about millionaires being “stung” by proposals to increase taxes on high-income earners.Benzing quotes Washington Wizards and Capitals owner Ted Leonsis as saying,  “business leaders and anyone who has achieved success in terms of rank or fiscal success is being cast as a bad guy in a black hat.” I do think that the Occupy Baltimore protesters I spoke to are reacting in that way.

But the real case for requiring the top earners and the big corporations to help balance the state budget and reduce the federal deficit is not about punishing anyone. It’s about everyone pulling their weight. As Benzing quotes me: “Those who are doing the best ought to be paying the larger part.” Millionaires should pay their fair share for the public structures and services that help make their success possible.

A recent report from our friends at“United for a Fair Economy” helps to illustrate the impact.  Marylanders with incomes over $107,000 pay an average of 7.3% of what they make a year in state and local income, sales and property tax. People with incomes under $22,000 -- about the poverty level for a family of four -- pay  9.9% of what they make. What if the two groups traded tax rates? And what if the second-richest (with a 9% average state an local tax rate) and the second-poorest fifth (10% of income for state and local taxes) also traded rates? The result would be that state, county and city governments in Maryland would have an additional $5.3 billion a year for education, healthcare, roads and transit, workforce training, and other needs – all of which would help create jobs and build a strong economy.

To  move towards this goal, Maryland should reinstate the additional ¾% tax on income over $1 million that was in effect for three years and expired in 2010. And it should plug loopholes in corporation income taxes. It should also help low-wage workers by expanding the state earned income tax credit and giving income tax refunds to offset the disproportionate sales taxes paid by families with poverty and near-poverty wage levels.

The energy and enthusiasm at Occupy Baltimore is as tangible as the anger and frustration. Let’s channel it into positive policy change that will make Maryland a more prosperous state.