Alternatives to State Services Cuts
The Hogan Administration has proposed draconian fiscal cuts to State services, while significant revenue savings and enhancements sit untouched. Below are just a few examples.
Funds / Accounts | Description | Potential Money |
Maryland has 243 Dedicated Special Funds. | These funds have many revenue sources that go toward many purposes. Historically Maryland has tapped excess funds to fill budgetary gaps. | Projected FY19 Balance for all Funds = $2.258B (DBM) |
Local Income Tax Reserve Account | During the O’Malley Administration, $916.8M was borrowed over two fiscal years to fill budget gaps | TBD |
Bond budget PAYGO items | $142M savings |
Revenue Enhancements | ||
Combined Reporting | Require large, multistate corporations to pay their fair share in corporate taxes for profits generated in Maryland | $78.6 million (2019 Fiscal Note) |
Throwback Rule | Require large, multistate corporations to pay their fair share in corporate taxes for profits generated related to sales in Maryland. | $56.8 million (2018 Fiscal Note) |
Close the pass-through/LLC loophole | Apply a 4% entity-level tax on profits over $1 million of S-corporations, partnerships, and LLCs. Reduces special treatment of pass-through businesses in state tax code. Exempt sole proprietorships, first $1 million profits of all companies. Expected to affect less than 2% of pass- through companies. | $124 million (MDCEP Estimate) |
Decouple 529 Tax Benefit | Prohibit an individual from claiming the State income subtraction modification for contributions made to the Maryland College Investment Plan if the contributed funds are used for private elementary or secondary education expenses. | $20.3 million (2018 Fiscal Note) |
Means test individual tax credits | Disallow tax credits (such as for solar panels and accessibility ramps) for high-income tax filers | Past proposals spread across multiple bills; total revenue unknown, possibly about $10 million. |
Restructure personal income tax brackets and rates | Lower income tax rates on income earners below median, raise rates on income earners above, restore millionaire tax at 7%. | $689 million (MDCEP Estimate) Restoring millionaire tax with no other restructuring - estimated $81 million |
Capital gains surtax | Apply a 1% surtax on capital gains income to partially offset special treatment in federal tax code. | $66–$96 million (2012–2016) |
Carried Interest | Apply a 19% state income surtax on the distributive or pro-rata share of a pass- through entity’s taxable income that is attributable to investment management services provided in the State. | $79 million (2017 Fiscal Note) |
Estate Tax Giveaway Reversal | Reverse handout to wealthy given in 2014 by resetting the estate tax exemption limit at $1 million instead of $5 million. | $137.7 million (2014 Fiscal Note) |
Carbon Tax | Establish a greenhouse gas (GHG) pollution charge on all GHG-producing substances distributed or used in the State. | General Fund revenue generated: $721.1 million initially, $2.7 billion by fifth year (2019 Fiscal Note) |
Expand Sales Tax to Services | DLS est. $600M annually | |
Tax Digital Goods | DLS est. $38-54M over next four years | |
Expand Sports Betting | DLS est. $14M annually |
Personnel Adjustments | ||
Hiring Freeze | FY20 est. savings $100M | |
Renegotiate Service Contracts | Analyze % of overall state budget goes to service contracts, audit and reduce | TBD |
Span of Control / Management Cuts First | Analyze top-heavy management agencies and recalibrate | TBD |
Early Retirement Buy-Outs | Allow service credit purchases to speed up voluntary/retired separation from service | For FY12, it was projected 1,000 early retirees would save the state $40M |
TOTAL | $5,104,500,000 |
