State Taxes

AT&T customers in Maryland who connect to the Internet with smart phones are being taxed illegally, a class action lawsuit filed Friday alleges. The lawsuit, filed in U.S. District Court by a Baltimore law firm led by trial lawyer William H. Murphy Jr., says those Maryland customers have been improperly billed a 6 percent monthly state tax and a monthly local communications tax. The lawsuit is seeking refunds and contends that total damages could exceed tens of millions of dollars.

If you're behind on your state taxes, you have just about two weeks to come clean and avoid severe repercussions. Maryland's tax amnesty program, launched in September, expires Oct. 30. Under the amnesty, individuals and small businesses must pay back taxes, but they will only owe half the interest usually assessed and won't face civil penalties or criminal prosecution. And for the first time, delinquent taxpayers have the option of paying up under a plan that stretches payments out until the end of next year.

Baltimorean Ben Greene stopped at the glass door entrance on West Preston Street on Friday and couldn't figure out why the state office building was locked. The lights were off, but no signs were posted to explain the closure. "Did they run out of money or something?" Greene asked, perplexed. As a matter of fact, the state is running short of cash. Gov. Martin O'Malley decided to close offices around Maryland and kept about 70,000 state employees home without pay as part of a plan to save $75 million and help close a budget gap of more than $700 million.

In 1987, Maryland launched its "one and only" tax amnesty holiday for those who hadn't paid their state taxes. Shockingly, in 2001 it happened again, and yesterday Gov. Martin O'Malley and others were in Dundalk touting Maryland's third such effort in 22 years. What do all three events have in common? Here's a clue: It's all in the timing. At the time of each, Maryland was in the throes of an economic downturn, and elected officials desperately needed the cash to help balance a state budget awash in red ink. This year's effort may prove to be the most desperate yet. Unlike in 2001, the General Assembly approved the amnesty last spring without giving the state comptroller's office any money to manage, advertise or market it. And that's one reason why even the legislature's own analysts are assuming it will raise about $10 million compared with nearly four times that amount eight years ago. Tax amnesty is not necessarily a bad policy, at least not in moderation.

You don't have to own a Swiss bank account to evade taxes. Maybe you purposely underreport your income to the IRS or have gone along for years without filing a tax return. Or, you made a mistake significantly in your favor on the return and never fixed it. Whatever the case, it's not too late to make it right with the IRS. Uncle Sam prefers that you voluntarily come forward and pay what's due rather than having to track you down or, in serious cases, prosecute you. And while you're at it, you might need to make good on state taxes.

Mark Lecates took advantage of the "cash for clunkers" program about 10 days ago, getting $4,500 off the price of a new Honda Civic for scrapping his nearly 10-year-old Ford Explorer. He has no complaints, but he does have a question about Maryland taxes in the transaction. The Baltimore resident paid state taxes on the full cost of the vehicle - before $4,500 was knocked off the price. His tax bill on the sale totaled around $1,025. By paying taxes on the clunker incentive, Lecates figures he paid an extra $270.

The millionaires are fleeing Maryland, all right. But not because of the measly tax surcharge on income over $1 million. They're bugging out because of Maryland's estate tax, which applies to a bigger portion of a dead person's hoard than the federal estate tax or those in other states. Strange to tell, rich refugees didn't want to speak with me. But their lawyers did. They suggest the high inheritance tax costs the state a lot more than it brings in because absconding aristocrats don't pay any Maryland tax, let alone the one when they die. "For years and years, I have had clients who complained about Maryland taxes and never took any action," says Lowell G. Herman.

Where did millionaires go? After reading Matthew Weinstein's rebuttal ("Millionaires ready to contribute," May 15) to Laura Smitherman's article ("Top payers fade away," May 14), I have to conclude that he has missed the point entirely. To argue whether taxpayers who earn more than $1 million are vacating Maryland is a sidebar to the real issue. The fact is, we are losing revenue because of a flawed economic policy. Raising income taxes on any group of citizens at the onset of a recession, and basing revenue projections off of nonrecession years, is a fundamental misunderstanding of economics.

State officials approved $82 million in cuts to Maryland's operating budget yesterday, bringing Gov. Martin O'Malley's midyear trims to more than $500 million as he struggles to keep spending in line with plummeting tax revenues, as the law requires. For the third time in the current fiscal year, the Board of Public Works voted to cut O'Malley's $14 billion budget, in part by abolishing hundreds of vacant positions and formally accounting for $34 million saved from a worker furlough plan.

It promotes economic development, preserves historic buildings, encourages Smart Growth and promotes the greening of America. Maryland's historic tax credit program has contributed to the rehabilitation of so many commercial developments in downtown Baltimore and other areas of the state that supporters say it served as a local stimulus package before there was a need for a federal one. This program, which has suffered under legislative tinkering, is...