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Tax Policy Politicking: Will a change in administrations deliver tax relief to Marylanders?

Feb 27, 2015 11:52AM ● By Cate Reynolds
By Jonathan Yates

It is doubtful that any working adult in Maryland has to be reminded of Ben Franklin’s famous observation that, “In this world nothing can be said to be certain, except death and taxes.”

In Maryland, taxes have always been a hot topic, but especially during the past election cycle in which taxes were the point of debate that seemed to resonate with voters the most. Fiscal relief has been touted to be on the way, at least on the state and county level. Governor Larry Hogan and Anne Arundel County Executive Steven R. Schuh, both Republicans, won election on November 4, 2014 largely due to pledges to reduce taxes.

Schuh was elected, in part, for a specific promise to roll back property taxes by 3 percent in Anne Arundel County. What does he see as the results of this proposal when it becomes the official policy or the county? “My proposal to reduce the property tax burden in the county by 3 percent will help create jobs, ignite economic growth, and will act as a down payment on a long-term initiative to reduce the overall burden of taxes and fees on our citizens,” Schuh says.

As for the overall economic impact, Schuh, a former investment banker, advises that, “Every dime that taxpayers have to pay towards their property tax bill is money that could be spent starting a business or creating jobs. Our plan will reduce that tax burden and make Anne Arundel County the best place to live, work, and start a business in Maryland.”

Hogan won an upset over then-Lieutenant Governor Anthony Brown in large part due to the more than 40 tax increases that Martin O’Malley’s administration implemented during his eight year governorship. In what seemed almost to be a parallel universe, the radio waves across the state were filled with commercials of Democrats in Maryland bragging to the voters in late October and early November about how they had voted against the tax increases of the O’Malley/Brown Administration.

There have been obvious returns on tax dollars for Maryland residents, though. Though coming in third this year, public education in Maryland had been ranked the best in the country since 2009 by Education Week. In a Kaiser Family Foundation study, Maryland ranks high in many health care measures.

 Nevertheless, Schuh has moved forcefully to lay the groundwork for his tax cuts. Most notable was his announcing a hiring freeze in Anne Arundel County. That could free up funds to finance tax cuts. As for Hogan’s prospects, former Governor Robert Ehrlich foresees a possible repealing of the Stormwater Remediation Fee, a state law from 2012 that raises money to combat pollution of the Chesapeake Bay.
Senate Majority Leader Mike Miller and Speaker of the House Mike Busch have already stated opposition to tax cuts from Hogan, though.

In early January, Hogan stated that, “No question that, our initial first session, we’re going to have some tax cuts.” In response, Busch cautioned that, “Not everything has to happen all at once. You know, you have to look at this as a distance run and not a sprint.” Miller was more blunt, challenging Hogan with the warning that, “The governor is not going to be able to cut the sales tax or the income tax anytime soon, because of the budget situation.” The “budget situation” for Maryland is a $750 million deficit for the year.

Meanwhile, individual taxpayers in Maryland can solidify their own budget situation, along with the work of those in office, with careful financial planning. April 15th is fast approaching and serves as a good reminder that there is much that can be done to lessen the tax burden for this year into next. According to, the tax burden in Maryland is the eleventh worst in the country. So there is a great deal of incentive to prepare in advance for the federal, state, and, even, city tariffs (for those living in certain municipalities).

For the average Maryland resident, maxing out contributions to all applicable retirement accounts is an intelligent, important first step. Individuals can choose from a traditional Individual Retirement Account (IRA) or a Roth IRA.

Both have maximum contributions of $5,500 for 2015 (add $1,000 if you are over 50 years old). A Roth IRA has tax free growth and tax free qualified withdrawals. The traditional IRA offers tax deferred growth, along with being able to deduct the contributions from the taxable income. Roth IRAs have much more flexible withdrawal provisions. It is important to note that IRA accounts have a 15 month contribution window, meaning all contributions made to an established account up until April 15, 2015 are applicable to the 2014 tax year, as long as the IRA account was created within that calendar tax year (i.e. by December 31, 2014). Contributions made to IRA accounts newly created in 2015 will only count toward the 2015 tax year (allowing contributions up until April 15, 2016).

 At work, there might be a 401K or a 403(B) plan, which are offered by public schools and certain non-profit organizations. Employers might offer matches that increase the yield from the money saved. This could also reduce the tax bite, too, resulting in a “win, win” situation for the worker. Endeavoring to “max out” on the “free money” offered by an employer for a 401K or other program is a good way for an individual to institute a disciplined savings program for retirement and other needs. Finding out all that is offered by a company can lead to a smaller tax bill and a bigger retirement nest egg.

Another retirement vehicle is the Health Savings Account (HSA), which has a $3,350 annual contribution limit for individuals, and $6,650 for a family. As described by Peter Green in an article in The Wall Street Journal, “The basic purpose of an HSA is to salt away pretax income to cover medical expenses not covered by health insurance. But those who generously fund their HSA may find some or all of those dollars can grow in a tax-deferred investment account for many years. Along the way, the money can be used tax-free to pay medical expenses or premiums on long-term-care insurance. After age 65, there’s no penalty for withdrawing money for nonmedical use; the money will be taxable, but will still have benefited from years or decades of tax deferral.” There are many benefits to opening as many retirement accounts as allowed by law. Making pre-tax deposits, thus lowering the immediate tax bill is an obvious one. Allowing for investment income and capital gains to accrue tax free is another.

Expenses related to business and other activities are also legitimate tax deductions. For the self-employed, these can be quite sizeable. Saving for college and private school expenses can help reduce taxes, too. The most important part is planning well in advance so that every possible move involving money has the potential for lowering your overall tax bill. This can be facilitated when more personal financial transactions are looked upon as vehicles for both investing, and reducing taxes.