Report Shows Maryland Taxes, Revenues Among Lowest in Nation

2/6/2002

From: Steve Hill of Maryland Budget and Policy Institute, 301-565-0505

SILVER SPRING, Md., Feb. 6 -- State and local governments in Maryland take in less in taxes and revenues than virtually every other state, according to a study by the Maryland Budget and Tax Policy Institute.

Total state and local revenue in Maryland -- including revenue from all taxes, fees, charges as well as transfers from the federal government -- ranked 48th highest among the 50 states, relative to the size of each state's economy. Further, over the last 20 years, Maryland was one of only five states where state and local revenues declined.

The report also found that state and local tax collections in Maryland are the nation's 38th highest, relative to the size of the state's economy. Similar to the trend in revenues, taxes in Maryland fell by 7 percent from 1979 to 1999, compared to an increase of three percent nationwide.

"Maryland is a low-tax, low-revenue state," said Steve Hill, director of the Institute and author of the report.

Total taxes in Maryland in 1999 equaled 10.2 percent of state personal income, compared to a nationwide average of 10.8 percent, the report found. Total revenue in Maryland was 16.1 percent of personal income, well-below the national average of 18.9 percent. Only Nevada and New Hampshire collected less in revenue than Maryland.

The rankings are among 20 tables and 4 charts of data included in the Institute's third edition of the Chartbook on Taxes in Maryland. The tables also show that Maryland's sales taxes, property taxes, corporate income taxes, and other taxes are among the lowest in the nation. Only personal income taxes are higher than the national average.

These findings are particularly timely as legislators are grappling with a budget deficit. Legislators are exploring ways to cut back on services to balance the budget. According to Hill, however "the problem isn't that the state spends too much money; rather, the problem is that it doesn't take in enough to meet critical needs."

"Policymakers and taxpayers want to keep government revenues low, but when they are too low, government is unable to provide the services that residents need." In recent years, advocates and analysts have called attention to shortfalls in state and local funding for mental health services, transportation, education, health care, and other services. Hill points out that despite being one of the richest states in the nation, Maryland ranks 40th among states in per-pupil support of higher education and 41st among states in providing health insurance to low-income adults. "These shortfalls exist because of an inadequate revenue structure. Taxes and revenues in Maryland are not sufficient to meet needs."

The institute -- a project of the Maryland Association of Nonprofit Organizations -- is a non-partisan research organization that studies state tax and budget issues. Most of the rankings in the Chartbook are based on the U.S. Census Bureau's State and Local Government Finance Estimates, the only comprehensive source of data on the taxes and revenues collected by the nation's 50 states and tens of thousands of local jurisdictions. The Institute adjusted the data for total personal income in each state, as measured by the U.S. Commerce Department, as standard methodology used by state finance analysts.

Copies of the report will be available online at www.marylandpolicy.org, or by calling the Institute at 301-565-0505.