Myths and Truths About State Taxes


November 15, 1992|By BRIAN SULLAM

It is not surprising that the people who paid for the notorious billboard over the Carroll County line in Pennsylvania -- the one that said "Welcome to Maryland, State of Taxes, Just Ahead" -- have never stepped forward. They are probably afraid they might be cited for violating the truth-in-advertising law.

Although Maryland withholding taxes take a big chunk out of our paychecks, and the state sales tax adds 5 percent to most of our purchases, we don't live in a state with high taxes.

Actually, 22 states have tax burdens a lot heavier than ours.

The average amount of state and local taxes paid by Marylanders is $11.18 for every $100 of income. States with higher tax burdens include such supposedly low-tax states as West Virginia ($12.16), Louisiana ($11.62) and Maine ($12.07).

The other popular myth is that Maryland has a state government full of big spenders who, over the years, have added to a burdensome bureaucracy that consumes scarce resources.

Again, perceptions don't quite square with reality. Forty-fouother states have state and local expenditures that are greater than Maryland's. Maryland spends $10.87 per $100 of personal income. In fact, that level has decreased 10.5 percent since 1979.

Those facts come from the Center for the Study of the States othe Rockefeller Institute of Government, a research organization at the State University of New York in Albany.

Of course, there are other measures of tax burden, the most popular being the annual survey in Money magazine. Maryland, according to Money, ranks 49th out of 51 jurisdictions -- making it a tax "hell."

Professional economists have problems with these ratings, particularly because they don't account for hotel and sales taxes that are "exported" -- that is, paid by non-resident tourists and shoppers.

At best, these ratings are a good starting point on discussin taxes.

But the perception persists that Maryland is a high-tax state. And most perceptions, no matter how far removed from reality, are based on some small truth.

In Maryland's case, the perception has developed that since William Donald Schaefer became governor, state spending has gone through the roof. If spending has gone up, taxes must have too.

It is true that Governor Schaefer has yet to meet a government program he doesn't like, but he had been able to pay for all the new programs because Maryland's population has continued to grow and, in general, has continued to prosper.

The general level of Maryland state and local taxation has actually declined 5.8 percent since 1979, according to the Rockefeller Institute.

If your state taxes seem higher than they used to, you might blame the president of the United States and the Congress. They are responsible for enacting the Tax Reform Act of 1986, which raised taxes for most middle-income families.

Because Maryland's income taxes conform with federal income taxes, whatever changes Congress makes in terms of tax rates, deductibility and exemptions, Maryland follows. For the great mass of Maryland's middle-class taxpayers, their federal and, therefore, their state taxes have increased.

Nevertheless, while the tax burden may seem heavier, Maryland is not a high-tax state by standard economic measures.

There is also the question of services taxpayers receive. Pennsylvania has low taxes and poor-quality public services. The deplorable condition of its roads is the first thing an outsider notices.

The low-tax states often have poor public institutions -- such as libraries, recreation centers and senior citizen centers -- amenities that improve the quality of life for everyone.

Carroll County librarians find that a great many Pennsylvanians want Carroll County library cards so they can borrow from the county libraries.

Maryland also has the public infrastructure that attracts employers. There is a good transportation system that moves people and goods efficiently.

Maryland also has a good system of public higher education that provides well-educated and trained graduates for prospective employers. That might explain why so many people come from Pennsylvania each morning into Maryland.

It is no surprise that sponsors of the billboard want to remain anonymous. I certainly would not want my name associated with such misinformed and misleading information.

Brian Sullam is The Baltimore Sun's editorial writer in Carroll County.

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