Coalition of businesses unite against sales tax expansion
ANNAPOLIS, Md. (AP) — A coalition of Maryland businesses came together Monday to oppose a measure to expand the sales tax to cover most professional services, a proposal that would raise an estimated $2.9 billion to pay for a comprehensive plan to improve K-12 education.
Christine Ross, president of the Maryland Chamber of Commerce, said the widening of the sales tax would discourage companies from expanding or relocating to the state. She also noted that states neighboring Maryland do not apply a sales tax as broadly.
“The chamber stands here today as a member of this concerned coalition of 29 statewide organizations who understand the devastating impact (the bill) will have on Marylanders, the small businesses community and our state’s economy,” Ross said.
The measure, which would take effect next year, would cut the sales tax rate from 6% to 5%. However, by extending the sales tax to cover services, the state would raise an additional $2.9 billion in fiscal year 2025.
Some exemptions would be kept for food, medicine, medical services, educational and social services and nonprofits.
Del. Eric Luedtke, the measure’s lead sponsor, said the proposal is aimed at addressing an economic trend with consumption patterns shifting more to the purchase of services, rather than goods. He also said discussions going forward could exempt more services from being affected, or lowering the rate even further.
“We need to make sure that every kid in the state of Maryland has access to a great education,” Luedtke, a Montgomery County Democrat and former teacher, said. “I think this is one option, only one option, but an option for how we get there.”
A separate measure, sponsored by Del. Lorig Charkoudian, would extend the sales tax to about a dozen services that are used mostly by wealthy residents, such as marina services, country club memberships and lobbying.
“The goal is to add more revenue without putting more burden on working class families,” Charkoudian, a Montgomery County Democrat, said.
Republican Gov. Larry Hogan has vowed to oppose a major tax hike.
Democrats who control the Maryland General Assembly are considering a measure that incorporates a state commission’s recommendations focusing on five main policy areas with the goal of making Maryland schools world class. The policy areas include expanding early childhood education like pre-K and increasing teacher’s pay. It also includes enhancing college and career readiness, aid for struggling schools and accountability in implementation.
It would be phased in over 10 years and cost billions of dollars, including $4 billion annually a decade from now. The state would pay $2.8 billion, while local governments would contribute $1.2 billion in fiscal year 2030.
While the first three years of the proposal have been paid for, lawmakers are considering an array of proposals in this legislative session to pay for later years of implementation.