November 8, 2007
Maryland collects more income tax from Montgomery County residents than it does from Baltimore City and Baltimore County combined, even though Montgomery has half a million fewer people. So it must be galling for Montgomery residents to read the Baltimore Sun's insulting dismissal of Montgomery's tax worries. Here's what the Sun wrote:
The same Senate committee responded to complaints from Montgomery County lawmakers and capped the income tax on high-end earners at 5.5 percent instead of the 6.5 percent Mr. O'Malley proposed. They also largely eliminated any tax reductions for low- and middle-income workers. Considering how regressive the rest of the tax package is, that's outrageous. Legislators say they want a more progressive tax system, but apparently they also fear the wrath of the state's rich, many of whom live in Montgomery County.
What O'Malley wanted from Montgomery wasn't 6.5% but 9.7% because unlike any other state, Maryland collects huge county income taxes. Here's a table of local rates from the comptroller's office:
County | Local Rate |
| County | Local Rate |
Howard | 3.20% |
| Kent | 2.85% |
Montgomery | 3.20% |
| Queen Anne's | 2.85% |
Prince George's | 3.20% |
| Baltimore | 2.83% |
Somerset | 3.15% |
| Calvert | 2.80% |
Wicomico | 3.10% |
| Cecil | 2.80% |
Harford | 3.06% |
| Washington | 2.80% |
Baltimore City | 3.05% |
| Garrett | 2.65% |
Carroll | 3.05% |
| Caroline | 2.63% |
St. Mary's | 3.00% |
| Dorchester | 2.62% |
Frederick | 2.96% |
| Anne Arundel | 2.56% |
Allegany | 2.93% |
| Talbot | 2.25% |
Charles | 2.90% |
| Worcester | 1.25% |
Source: Comptroller of Maryland (http://individuals.marylandtaxes.com/incometax/localtax.asp) | ||||
And here's a table comparing Maryland's average county income tax rate with the few other states that even permit them.
Maryland has the Highest Average Local Income Tax Rate in the Country
| Average Local Income Tax Rate | Rank |
Maryland | 2.73% | 1 |
Ohio | 1.81% | 2 |
Pennsylvania | 1.28% | 3 |
Indiana | 0.98% | 4 |
Kentucky | 0.91% | 5 |
Michigan | 0.88% | 6 |
Delaware | 0.87% | 7 |
New York | 0.67% | 8 |
Oregon | 0.36% | 9 |
Iowa | 0.25% | 10 |
Alabama | 0.19% | 11 |
Missouri | 0.12% | 12 |
New Jersey | 0.09% | 13 |
Arkansas | 0.06% | 14 |
Note: County and city rates are weighted by the amount of income earned there before averaging. | ||
While making snide remarks about rich tax-avoiders in Montgomery County, the Sun should at least be honest enough to point out that everyone in Maryland (except in Worcester County) is already out-paying everyone in the border states. And in the three highest-taxed counties -- Montgomery, Prince George's and Howard -- the current 7.95% rate makes Maryland a tax pariah compared to Pennsylvania's 4.35%, Virginia's 5.75%, West Virginia's 6.5%, and Delaware's 6.82% (and Delaware has no sales tax at all!). Even the Senate version worsens that regional disparity, bumping Marylanders up to 8.7%, but the Sun prefers O'Malley's target of 9.7% which would be the highest rate in the country on income between $200,000 and $335,000.
More comparisons of Maryland's tax system with the other states in region available in a recent report. In short, Maryland is headed for a New Jersey style tax code, but without the economic advantage (proximity to New York City) that keeps many New Jersey businesses from fleeing.