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Maryland special session no bonanza for this county

December 11, 2007

The most telling comment about the results of the Maryland General Assembly's recent special session came from Tim Troxell, executive director of the Hagerstown-Washington County Economic Development Commission.

Washington County is in the "skinny" part of the state, just a short drive from Pennsylvania and West Virginia. That means that companies that want to be near the intersection of Interstates 70 and 81 could easily shop for the best deal on corporate and personal income taxes.

But even with a 1 percent increase to 8 percent, Maryland's corporate income tax remains below Pennsylvania's, which is 9.99 percent and West Virginia's, which is at 9 percent.

Maryland's sales tax increase to 6 percent will end the state's competitive advantage over Pennsylvania and West Virginia, both of which have a 6 percent rate.

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Nearby Delaware benefits most from Maryland's increase, since it has no sales tax and merchants there have been happy to publicize that fact.

As for the personal income tax increase, which affects those in upper brackets, an October analysis by The (Baltimore) Daily Record found that more business owners than companies would be affected by the changes.

For the past 40 years, Maryland's personal income tax has been flat, with filers with any income over $3,000 paying a 4.75 percent rate.

The change adds three new rates, including:

· 5 percent for single filers with incomes topping $150,000 and joint filers who make more than $200,000.

· 5.25 percent for single filers with incomes topping $300,000 and joint filers who make more than $350,000.

· 5.5 percent for single and joint filers with incomes of more than $500,000.

The effect is compounded somewhat because in Maryland counties also levy an income tax, commonly known as the "piggyback" tax because it is a percentage of the state income tax.

For Washington County, the changes mean several things. Businesses will pay more for goods they buy, which means their prices might increase. With fuel costs rising and power prices due to go up soon, the burden on business, especially small business, will get heavier.

Few expected the special session to be perfect, but its worst feature might have been the debate over which services to cover under the state sales tax.

The session began with a proposal to tax landscaping services, health clubs and auto repair, but those were dropped after lobbyists for those industries raised a fuss.

On Sunday, The Washington Post reported that the idea of taxing computer services came up during a state senators' luncheon meeting.

The measure, expect to raise $200 million, was passed before service providers had a chance to object. Now, according to The Post, they're working on proposals for repeal in the regular session.

If legislating means looking at the options, hearing from those concerned and then enacting fair legislation, this wasn't it.

This was more like a drive-by raid on one industry's revenues, done not because it was the best choice, but because computer-service providers weren't ready to defend themselves.

In this case, those elected to govern forgot that they are supposed to be the servants of the people, not would-be masters who need to be closely watched so they won't do their constituents any more harm than necessary.

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