By Paul K. Schwartz
Are you angry yet?
No, I’m not directing this question to Trump voters. For Trump voters the question would be something more like “have you seen the light yet?”
No, this question about anger is directed at you if you are a Maryland taxpayer who ordinarily had itemized deductions on your Maryland state tax return.
Who should you be angry with, you ask? The answer to that question is: With your elected officials in Annapolis who failed miserably in protecting you from the tax hike imposed on your 2018 state income taxes resulting from the federal tax plan passed last year and effective on your 2018 taxes.
It’s not as if there weren’t some bills submitted that attempted to do just that. There were bills that called for decoupling state deductions from federal deductions. Currently, because itemization at the state level is tied to the Federal Schedule A, if you take the now-increased standard deductions on your Federal return, you are precluded from itemizing on your Maryland state return. These bills never made it out of committee during the 2018 legislative session in Annapolis. As well, neither did bills designed to put back many of the middle-class tax deductions at the state level that were removed in the federal tax plan.
Another manner in which to mitigate the increased state tax burden for those who ordinarily itemized would have been to simply raise the standard deduction at the state level. This they did, but nowhere near the level needed to counter the increased state tax burden. The legislation that was passed to increase the state standard deduction amounts to an extra $20 to $40 per taxpayer.
To that, I say, don’t spend it all in one place.
As I have written in the past, this is your money, not the state’s. Whatever small benefit you might see at the federal level was not intended to be swallowed up by the state. The windfall for the state coffers had been estimated to exceed the $500 million mark, of which the state had no difficulty finding ways on which to spend it.
Certainly this is not a problem that will cease to exist after just one year. Until it is addressed, Maryland taxpayers will continue to experience the state tax hike year after year after year. Moreover, the longer it takes to fix the injustice, the more our elected officials will be used to the windfall and the spending ability that comes with it.
This issue is, more than anything, a math issue. If you deduct less, you pay more. If you deduct more, you pay less. If any legislator tells you the reason legislation was not passed is because “it is too soon,” suggest they retake high school math.
Why, then, did your legislators really fail to correct this easily-correctable problem with the bills submitted during last year’s legislative session you wonder? Well, here is a response to that very question from state delegate Geraldine Valentino-Smith:
“As you may be aware, there were bills introduced during the 2018 legislative session which would have allowed Marylanders to itemize their deductions on their State returns even if they did not on their Federal returns. The Ways and Means Committee received guidance from Comptroller Franchot’s office and the Maryland Association of Certified Public Accountants (CPAs) who warned that there are administrative complexities in doing so. Particularly relating to the State’s ability to piggyback off of Federal IRS tax audits and that it could be confusing for the overall majority of Maryland taxpayers. After receiving that advice from the Comptroller’s Office and the Association of CPA’s, the Committee did not pass the bill.”
Let me translate this explanation for you. What is being said is that the reason for the failure of the legislation to be passed is because the Comptroller said he needs more staff to take on the additional work that would be created if itemizing at the state level was no longer based on the Federal Schedule A.
Okay, hire more staff now and you can even take some of the windfall to pay for it. (On the other hand, now that there will be significantly less itemization at the state level, does that not free up current staff to take on more work?)
Bottom line? There is power in numbers and if you want this injustice fixed, you, every one of you, must raise your voice and make your concern heard by the very elected officials who turned a blind eye to fixing it last year. If you do not make it clear to your legislators that you take this issue seriously and will hold them accountable for not protecting your interests, they won’t.
How do you make your concerns raised to your legislators? Well, thanks to NARFE (National Active and Retired Federal Employees) that task has been made quite simple. Google “MD NARFE”, click on the “Maryland Federation of NARFE” and then click on “Legislative – State Page” in the upper right-hand corner. You will then have access to an abundance of important information on this tax issue as well as “What you can do about it.” The “What you can do about it” link will enable you to directly contact your elected officials in Annapolis as well as provide you with a sample letter that can be used in the process.
It’s time to get angry and express that anger in a productive manner. Go for it! The money you save may be your own.