Maryland's poorest families are getting a fairer shake on their state taxes than they did six years ago, but they still pay almost as much in taxes, relative to their income, as the wealthiest citizens in the state, according to a study that calls Maryland's taxation system regressive and inequitable.
The study, by Citizens for Tax Justice, a non-profit organization supported by labor and citizens' groups, shows that Maryland families earning in the middle 20 percent of the income spectrum paid 10.6 percent of their 1990 earnings in state personal, property, sales and excise taxes. That is 30 percent more than the top 1 percent of wage earners, who paid 8.1 percent of their income to the state.
The lowest 20 percent of wage earners paid 8.0 percent of their income in combined state taxes, according to the study, called "A Far Cry From Fair."
The study looked at state tax systems across the country, evaluating states according to how much they tax the poor and how little they tax the rich. Maryland did not make itonto the group's "Terrible 10" lists, nor was it cited as one of those that raised taxes on poor and middle-income families while cutting them for the rich in the last six years.
In fact, since 1985 state tax rates on the poorest 20 percent of Maryland families fell to 8.0 percent from 10.3 percent, according to the study.
"That's progress," said GeorgeBuntin, executive director of the NAACP's Baltimore branch and a member of the board of Maryland Citizen Action Coalition, which joined Citizens for Tax Justice in announcing the Maryland portion of the study. "But it is still outrageous that Maryland's wealthiest 1 percent, earning nearly $1 million per year, pays one-tenth of 1 percent more in state and local taxes than families of four earning $15,800."
The study showed that sales taxes were the biggest tax burden on the bottom one-fifth of wage earners in Maryland, costing 3.6 percent of their income. By contrast, the wealthiest 1 percent paid only 0.9 percent of their income in sales taxes. Likewise property taxes for the poor, at 3.1 percent of income,dwarfed the 1.0 percent of income the wealthiest 1 percent of Maryland's families paid.
According to the study, those numbers were not as bad as the U.S. averages: The poorest 20 percent of families in the nation paid 5.7 percent of their income for sales taxes and 5.4 percent for property taxes. The wealthiest 1 percent paid 1.2 percent and 1.3 percent for sales and property taxes, respectively.
Citizen Action and the Maryland-D.C. AFL-CIO, which joined in announcing the study, said they "support the spirit" of the report of the Maryland Commission on State Taxes and Tax Structure, known as the "Linowes report" after its chairman, R. Robert Linowes.
The report was the inspiration for a tax reform bill requested by Gov. William Donald Schaefer that would have raised about $800 million in new taxes in the first year. The bill, which was defeated, would have reformed the state's tax system to even out the differences in revenues collected by the wealthiest and poorestjurisdictions and would have made the system less regressive. A regressive tax system imposes a heavier tax burden, proportional to income, on the poor than on the wealthy.
The Linowes report, however, "simply does not go far enough to restore equity and fairness to the state's tax system, and it relies heavily on regressive taxes that will increase the state and local tax burden for too many residents who are already shouldering more than their fair share of that burden," said George Moehrle, president of Maryland Citizen Action Coalition.
"They're right," said Mr. Linowes, a partner in the law firm of Linowes & Blocher. But a tax system that is completely progressive, he said, would have to rely too much on income taxes, the least regressive type of tax. "From a practical matter, the rates would have to be so high that from an upper- and middle-income perspective, it would be prohibitive."
"There's always room for improvement," said Senator Laurence Levitan, D-Montgomery, chairman of the Senate Budget and Taxation Committee. "But unless you go to avery, very progressive tax structure, you're going to find that the middle-income [families] pay more of a share of their income than the wealthy," because of various tax deductions.
Mr. Levitan disagreed that the Linowes proposals to expand the state's sales taxes would make Maryland's tax system too regressive. "All the studies that I've seen show that Maryland in its overall tax mix is relatively low in sales but high in income taxes."
Mr. Levitan and Delegate Tyras S. Athey, D-Anne Arundel, the chairman of the House Ways and Means Committee, said their panels will begin summer study of the Linowes proposals in about a month.
The new tax fairness study, Mr. Athey said, is another bit of evidence that the issue of tax reform needed more time than the three-month General Assembly session allowed.
"This is the reason why I was so firm in my opinion as to not doing anything with Linowes during the 90-day session," he said. The Linowes commission "took three years to do what they did. The governor wanted us to act on it in 90 days."