Soaking the Middle Class

April 28, 1991

In case state legislators needed a reminder, a non-profit group has just reported that Maryland's tax structure is seriously skewed in favor of the rich. A day later, another group gave Maryland a flunking grade in governance because of its unfair and inequitable tax system.

The first group, Citizens for Tax Justice, found that middle-class Marylanders pay one-quarter more on a percentage basis in taxes than their wealthier neighbors. Middle-income wage earners end up subsidizing public services for the rich.

This basic inequity cries out for change. It is not a new finding. The Linowes commission on structural tax reform concluded last year that "the overall state and local tax system is taxing lower- and middle-income taxpayers more heavily than those with higher incomes." Yet the legislature flatly rejected the commission's recommendations.

Still, the inequity remains. Maryland's middle-class is being soaked for tax money while the well-to-do pay less than their fair share. According to Citizens for Tax Justice, middle-income families earning an average $39,000 shell out 10.9 percent in local taxes; while the state's top 1 percent, earning an average $875,000, pay only 8.1 percent -- nearly the same percentage as poor families.

That is deplorable public policy -- and risky politics. Middle-class wage earners are beginning to recognize that state legislators have erected a maze of tax policies that unfairly penalize them. Worse, legislators adamantly refuse to change those policies. Are they afraid of alienating well-off campaign supporters? Are they unable to take the heat that is sure to come with any overhaul of the tax system? Whatever the reason, lawmakers could soon find themselves under growing public pressure to give middle-class Marylanders tax relief.

Meanwhile, a second study, from a business-oriented think tank called the Corporation for Enterprise Development, gave Maryland extremely low marks on its tax policy because its income tax is regressive, its sales and excise taxes unfairly burden the poor, the state relies far too heavily for revenue on the income tax and badly underutilizes its sales tax. In sizing up the state's tax and fiscal system, the group awarded Maryland an "F."

There are numerous ways to rectify these embarrassing situations. The Linowes commission offered a detailed blueprint for achieving a sounder and fairer tax system. Legislative committees studying tax reform this summer ought to follow the panel's basic goals: 1) set up a system that taxes everyone according to their ability to pay, and 2) tax people in similar circumstances similarly. Soaking the middle class won't suffice any longer. Either state legislators start to revise the way Maryland taxes its citizens, or they run the risk of becoming the focal point of voter dissatisfaction.

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