Maryland’s already swollen bank accounts are expected to grow by $1.6 billion, state forecasters said Thursday, setting the stage for renewed debate on how to spend the state’s historic surplus.
Democrats have pushed extra funding for schools, child care and tax breaks on necessities such as diapers and medical equipment. Republicans have called for across-the-board tax breaks for retirees.
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Leaders from both parties immediately rallied around plans to suspend the state’s gas tax for a month, now that it’s clear Maryland can afford to forgo the roughly $100 million it would have generated for transportation projects.
Maryland’s projected surplus ballooned to $7.6 billion by the end of 2023, prompting bipartisan calls to send stimulus checks to state residents.
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States across the country have balance sheets dripping with extra money as federal and state stimulus cash circulates through the economy. Nationwide, 32 states reported higher-than-expected revenue, according to the National Association of State budget Officers.
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Virginia’s surplus for the next two fiscal years exceeds $14 billion, prompting debate about delivering as much as $5.3 billion in tax cuts. California’s surplus stands at $31 billion; Minnesota’s at $9.25 billion; Wisconsin’s at $3.8 billion.
Maryland Comptroller Peter Franchot, a Democrat running for governor, on Thursday pitched $2,000 “emergency survival checks” for the working poor, along with $500 million for small businesses and another $500 million for child care providers.
“We have enough money,” he said.
Republican state lawmakers, who are vastly outnumbered in the General Assembly, renewed their call for “meaningful” tax cuts, including a direct-cash payment and Gov. Larry Hogan’s (R) marquee, $4 billion proposal to eliminate all state taxes on retirees.
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“Marylanders need and deserve tax cuts right now,” House Minority Leader Jason C. Buckel (R-Allegany) said in a statement. “The most important interest group in our eyes are Maryland’s taxpayers, and we should give them their money back.”
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“We have a once-in-a-generation opportunity to advance substantial tax relief for our families, small businesses, and retirees,” Hogan said in a statement.
But Democrats have been reluctant to embrace far-reaching tax cuts with only a short-term surplus to pay for it, especially when the full tab of a costly education program is due in the next five years.
House Appropriations Chairwoman Maggie McIntosh (D-Baltimore City) said the plan is to send one-time help to places struggling from the pandemic, such as hospitals, theaters, arts organizations and nursing homes. The money could also be used to launch a statewide, paid-family-leave program or help subsidize the cost of child care.
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“We’re being pretty cautious about not adding on too much spending that would be ongoing,” said McIntosh, who added that some tax cuts for retirees are part of the discussion.
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In Maryland — as with other states — income tax and sales tax receipts have skyrocketed far more than already rosy estimates had predicted.
The state has not recovered many of the low-wage jobs lost during the pandemic, forecasters said, but people with jobs are largely seeing bigger paychecks.
“We’re getting a lot more wage income from fewer jobs than we had pre-pandemic, which speaks to significant growth in the average wage,” said David Farkas, acting director of the Maryland Bureau of Revenue Estimates.
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Record inflation has also driven up sales tax revenue, which grows as the price of goods increases. At the end of January, Maryland had collected $177 million more than expected in sales tax — a figure calculated before February’s historic 7.9 percent inflation set in.
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The Democratic-dominated House of Delegates has already passed cuts to offset the pain, exempting diapers, toothbrushes, medical devices used for dialysis or diabetics, infant car seats and bottles, among other things, from the 6 percent sales tax. It also passed a credit for businesses who hire people off the unemployment rolls or other disadvantaged circumstances. The total price tag for those cuts: about $60 million per year.