Alternative to State Service Cuts

Alternatives to State Services Cuts

The Hogan Administration has proposed draconian fiscal cuts to State services, while significant revenue savings and enhancements sit untouched. Below are just a few examples.

Funds / Accounts


Potential Money

Maryland has 243 Dedicated Special Funds.

These funds have many revenue sources that go toward many purposes. Historically Maryland has tapped excess funds to fill budgetary gaps.

Projected FY19 Balance for all Funds = $2.258B (DBM)

Local Income Tax Reserve Account

During the O’Malley Administration, $916.8M was borrowed over two fiscal years to fill budget gaps


Bond budget PAYGO items

$142M savings

Revenue Enhancements

Combined Reporting

Require large, multistate corporations to pay their fair share in corporate taxes for profits generated in


$78.6 million (2019 Fiscal Note)

Throwback Rule

Require large, multistate corporations to pay their fair share in corporate taxes for profits generated

related to sales in Maryland.

$56.8 million (2018 Fiscal Note)

Close the pass-through/LLC loophole

Apply a 4% entity-level tax on profits over $1 million of S-corporations, partnerships, and LLCs.

Reduces special treatment of pass-through businesses in state tax code. Exempt sole proprietorships, first $1 million profits of all companies. Expected to affect less than 2% of pass-

through companies.

$124 million (MDCEP Estimate)

Decouple 529 Tax Benefit

Prohibit an individual from claiming the State income subtraction modification for contributions made to the Maryland College Investment Plan if the contributed funds are used for private elementary or secondary education


$20.3 million (2018 Fiscal Note)

Means test individual tax credits

Disallow tax credits (such as for solar panels and accessibility ramps) for

high-income tax filers

Past proposals spread across multiple bills; total revenue unknown, possibly about $10


Restructure personal income tax brackets and rates

Lower income tax rates on income earners below median, raise rates on income earners above, restore millionaire tax at


$689 million (MDCEP Estimate)

Restoring millionaire tax with no other restructuring - estimated $81 million

Capital gains surtax

Apply a 1% surtax on capital gains income to partially offset special treatment in

federal tax code.

$66–$96 million (2012–2016)

Carried Interest

Apply a 19% state income surtax on the distributive or pro-rata share of a pass- through entity’s taxable income that is attributable to investment management services provided in the


$79 million (2017 Fiscal Note)

Estate Tax Giveaway Reversal

Reverse handout to wealthy given in 2014 by resetting the estate tax exemption limit at $1 million instead of

$5 million.

$137.7 million (2014 Fiscal Note)

Carbon Tax

Establish a greenhouse gas (GHG) pollution charge on all GHG-producing substances distributed or

used in the State.

General Fund revenue generated: $721.1 million initially, $2.7 billion by fifth year (2019 Fiscal Note)

Expand Sales Tax to Services

DLS est. $600M annually

Tax Digital Goods

DLS est. $38-54M over next

four years

Expand Sports Betting

DLS est. $14M annually

Personnel Adjustments

Hiring Freeze

FY20 est. savings $100M

Renegotiate Service Contracts

Analyze % of overall state budget goes to service contracts, audit and reduce


Span of Control / Management Cuts First

Analyze top-heavy management agencies and



Early Retirement Buy-Outs

Allow service credit purchases to speed up voluntary/retired separation from service

For FY12, it was projected 1,000 early retirees would save the state $40M