By Adam Pagnucco.
Delegate Julie Palakovich Carr and Council Member Will Jawando are proposing legislation that would allow counties to create high income tax brackets to finance the creation of low income tax brackets for lower income people. Is it necessary to raise taxes on some to finance tax cuts for others?
Just this year, two other Maryland counties have figured out how to adopt income tax brackets without increasing taxes. One of them is Frederick County, which once had a flat income tax rate of 2.96%. In May 2022, the Frederick County Council passed an ordinance establishing three brackets:
2.75% for single taxpayers with taxable income of $50,000 or less
2.75% for joint taxpayers with taxable income of $100,000 or less
2.96% for all other taxpayers
In her FY23 budget, Frederick County Executive Jan Gardner bragged about the income tax brackets, saying that they benefited “the many workers who make up the backbone of our society, including teachers and school system support employees, public safety workers, restaurant workers, child care workers and many others.” Let’s remember that Gardner is a Democrat. Her budget estimated that income tax receipts would climb from $265 million in FY22 to $307 million in FY23 despite the new tax brackets. We shall see if she turns out to be right.
The other county that has adopted tax brackets is Anne Arundel County, which once had a flat income tax rate of 2.81%. In his FY23 budget, County Executive Steuart Pittman wrote:
Remember the Tax Relief for Working Families Act that was my number one state legislative priority for two years? Well, it passed and we’re using it. Our county has the lowest income tax rate in the region, at 2.81%. Our neighbors are at the state maximum of 3.2%. This budget lowers that rate to 2.7% on the first $50,000 of taxable income for every county taxpayer. If you’re a bus driver or a janitor, that’s a lower rate on all your income, but all taxpayers benefit.
Once again, the county projects an increase in income tax receipts from $647 million in FY22 to $715 million in FY23 despite the new tax brackets. Pittman commented further on how he was able to afford the new brackets with no offsetting tax hike.
Usually, when politicians cut taxes, they pass on the burden to future taxpayers. With this budget we do the opposite. We are protecting our future taxpayers. Here’s how. This is the first budget in county history that reduces, rather than increases, county borrowing. That’s possible because we are doing what fiscally responsible families do in a good year. We are using our surplus from last year’s conservative budgeting to pay up-front far more than previous administrations did for capital expenditures. Our $205 million paygo protects future taxpayers.
Pittman’s math may or may not work out. Recessions have a way of disrupting budget plans. But let’s appreciate his intentions here and remember that Pittman and Frederick County’s Gardner ARE BOTH DEMOCRATS.
So the premise of the Palakovich Carr/Jawando income tax bill does not hold up. Higher income taxes are not necessary to finance lower income tax brackets and Democrats in Anne Arundel and Frederick counties proved it. If Jawando wants to cut taxes on lower income people, all he has to do is follow the examples of Pittman and Gardner. No new legislation is needed.