Democrats To Propose Sales Tax Expansion To Fund Kirwan

In Annapolis, a bill will be introduced in the House of Delegates on Thursday to lower the state's sales tax rate from 6% to 5% but expand it to include various services that are not currently subject to the sales tax.

House Majority Leader Eric Luedtke sponsored the bill and said it would generate $2.6 billion a year, by 2025. Leudtke said that once fully implemented, this tax expansion would fund the state's share of the cost of the Kirwan Commission's recommendations for public schools. Another $1.4 billion would be funded by Baltimore City and the state's 23 counties.

That cost is now estimated by the Department of Legislative Services at $32 billion over 10 years.

Luedtke says the bill would expand the sales tax to any service except for those involving education, health services, social services or nonprofits.

Under current law, most services are not subject to the sales tax. However, certain telecommunications services are subject to the tax, as are those related to manufacturing or producing personal property; transportation of electricity or natural gas; commercial cleaning and janitorial services; credit reporting and security services.

"This would make sure everybody is on the same footing," Luedtke said.

One #Maryland #democrat is proposing a cut to the state sales tax, while adding taxes to ‘professional services’ as a way to pay for the #KirwanCommission’s reccommendations. @wbalradio pic.twitter.com/fzkYCTmA55 — Phil Yacuboski (@WBALPhil) February 20, 2020

Lawmakers attempted to extend the sales tax to various services in a 2007 special session called by then Gov. Martin O'Malley. That year, the bill included legal services, lawn care and gym memberships. Eventually, lawmakers removed most services form the sales tax after various business groups lobbied for changes in the bill. Lawmakers ended the special session extending the sales tax only to computer services. However, that was repealed in the 2008 session.

Lawmakers voted to increase the sales tax rate during the 2007 special session. when the rate was increased from 5% to 6%.

Luedtke said that he knows the opposition to the sales tax expansion will come from a number of industries.

"The difference between this bill and 2007 is we're actually lowering the rate. After this bill, we would have a lower sales tax rate than every neighboring state except Delaware," Luedtke said.

Delaware has no sales tax.

Gov. Larry Hogan blasted the proposal, saying the move would carry four times the impact of the 2007 increase. He said it would represent lawmakers going back on a pledge not to propose onerous new taxes.

"This is a $2.6 billion per year increase in the sales tax,. It is a tax on working families. It is a tax on single moms," Hogan said. "This is the largest tax increase ever in the history of the state."

Luedtke said the conversation on this bill is in the early stages, but he thinks the measure would have enough support from lawmakers and the public to pass.

"We deserve the best schools in the nation. We deserve the best schools in the world. I think Marylanders are willing to pay the extra $3 a week that it would cost the average family, to pass this legislation," Luedtke said.