Senate committee gets sales tax lesson
A Senate committee today listened to the pros and cons of expanding Maryland's sales tax base to include more services, as well as goods purchased over the Internet.
Tangible products, but few services, sold by Maryland retailers are taxed at 6 percent. This year, the sales tax is predicted to generate $4.2 billion, about 30 percent of the state's general fund revenues, according to the Department of Legislative Services.
Legislative services analysts prepared a chart to show how much additional revenue the state could make by taxing engineering services, cable television, automobile repair, golf and other matters. If the state imposed a 6 percent tax on those and a dozen other services, it could bring in at least $1 billion more each year, the department estimated.
Taxing goods purchased over the Internet -- remote sales -- would bring Maryland another $184 million annually, one University of Tennessee study cited by legislative services showed. But an Internet sales tax is far more complicated, possibly involving federal approval.
Members of the Senate Budget and Taxation Committee hastened to say they are not considering expanding the sales tax base at the time, but they spent more than two hours on the topic at a hearing in Annapolis.
"This is just a discussion," said Sen. James E. DeGrange Sr., an Anne Arundel County Democrat on the committee. "There's nothing being considered. We're just here to hear comments."
Yet tax talk has been pervasive for the past year, as the General Assembly struggles with budget holes deepened by the recession and slow economic recovery. This year, the legislature signed off on a hike of the sales tax on alcohol, bumping it from 6 percent to 9 percent.
The same committee received a dire update this morning about the loss of federal money -- and possibly its top bond rating -- that could result from the debt ceilings talks in Washington.
Maryland Chamber of Commerce President Kathleen T. Snyder and other business advocates warned lawmakers that any decision to expand the sales tax base could drive companies out of Maryland.
Taxes and regulations have already caused a "competitiveness issue" in Maryland, Snyder said.
The Democrat-led General Assembly meets in October for a special session to approve a congressional redistricting plan. Although some legislative leaders had talked this spring about expanding the session to include revenue and other issues, recent Annapolis chatter has been that it'll be tightly focused on redistricting.
The legislature convenes for its next regular 90-day session in January.