Proposed legislation to repeal the “Rain Tax” and eliminate automatic gas tax increases while delivering relief for retired military, emergency services and small businesses
ANNAPOLIS, MD - Delivering on commitments made to Maryland voters during his campaign, Governor Larry Hogan today unveiled in his State of the State address a series of tax relief measures for individuals and businesses. The governor’s tax relief package is the first step in a broader effort to establish an environment that encourages investment in new businesses and ensures that Maryland remains an attractive state for people to live, raise families, and retire.
“The cost of implementing these tax measures in FY2016 is minimal, but these proposals are necessary to get our state heading in the right direction when it comes to tax policy,” said Governor Hogan. “After 40 consecutive tax hikes, the people of Maryland deserve to see a little less taken from their wallets each year.”
Included in the Governor’s 2015 Legislative Package are the following tax relief measures:
Repeal Of Mandate For Stormwater Management
Passed during the 2012 legislative session, the Rain Tax has proven to be unpopular with voters and local officials, who have expressed frustration with the law. The administration’s bill would remove the Rain Tax (Section4-202.1 of the Environment Article), but would leave open the option under Section 4-204 for local governments to adopt a “system of charges” to pay for storm water management.
“Dealing with the problem of storm water management and working to restore our most treasured asset, the Chesapeake Bay, is a goal we all strongly agree on,” said Governor Hogan. “But a state law that has forced certain counties to raise taxes on their citizens, against their will, and that usurps their authority, is just plain wrong.”
Exemption For Military Retirement Income
The administration’s Exemption for Military Retirement Income bill aims to eliminate income tax on all military retirement income, phasing in their relief over a period of four years, providing for 25 percent relief in the first year, rising to 100 percent. This measure would be effective for income earned beginning January 1st, 2015 and would impact over 50,500 veterans in the state who earn an average of approximately $28,000 in military pensions. Under current Maryland law, all but the first $5,000 of military retirement income is subject to personal income tax.
Hometown Heroes Income Tax Exclusion
In Part I of this bill Governor Hogan is proposing to exempt any retired law enforcement, fire, rescue or emergency personnel from tax on retirement income specific to their service as a first responder. This Hometown Heroes Income Tax exclusion would be phased in over a period of four years. Part II of the bill would also increase to $5,000 this year the Volunteer Police, Fire, Rescue, and Emergency Personnel Subtraction Modification Program, a program which provides an income tax subtraction or deduction modification for emergency services volunteers.
“The men and women who have put their lives on the line for us and who have committed to serving our nation and our communities have earned these tax breaks, and they deserve our thanks and support,” said Governor Hogan. “Many have created businesses in retirement, and ensuring that all retirees can afford to live and stay close to family and friends in Maryland just makes sense.”
Personal Property Tax Exemption For Small Business
Given the important role that small businesses play in creating jobs and growing the state economy, Governor Hogan is proposing new legislation that would eliminate the personal property income tax for businesses that have less than $10,000 in personal property. Under current law, all Maryland businesses must inventory and pay taxes against such personal property as inventory, office furniture, fixtures, equipment, and plant machinery. More than 70,000 Maryland small businesses would benefit from this action, freeing them from making the decision between hiring a third party to carry out an inventory or the time consuming process of documenting minor business purchases themselves.
Repealing The Automatic Gas Tax Increases
In order to ensure that Maryland’s citizens have the benefit of seeing how their legislators vote whenever a new increase is enacted, the Hogan administration will propose legislation to repeal the automatic gas tax increases in Maryland. Under laws passed in 2013, Maryland’s tax on gasoline is indexed to inflation through a Consumer Price Index adjustment calculated by the Comptroller on June 1st of each year. Further, existing law will see the Sales and Use Equivalency Tax on Gas rise to 3% on July 1st 2015. This tax could also increase to 4% in January 2016 and 5% in July of 2016, contingent upon federal passage of an internet sales tax.
“Maryland citizens have the right to know when their elected leaders are taking more of their hard earned dollars,” said Governor Hogan. “The current law allows taxes on gas to steadily grow without a single vote, and hurts struggling Maryland families and our most vulnerable citizens in the process. These automatic tax increases need to be repealed.”