Why Maryland’s New Tax on “the Rich” Will Hurt Women (and Taxpayers Everywhere)

In the Baltimore Sun, the Maryland Public Policy Institute's Sean Kennedy points out that the new tax increase on workers earning more than $100K passed by Maryland Governor O’Malley and his allies in Annapolis will also cost taxpayers across the country:

The federal tax code gives Maryland's big spenders yet another incentive to raise taxes on $100,000-plus earners and their families by making it painless for those taxpayers. The federal tax code allows taxpayers to write off their state and local taxes from their federal taxable income. The more Maryland taxes federal employees, the less money Uncle Sam can ask from them in taxes. This exemption subsidizes some of the highest-tax states and localities, while reducing federal revenues at the same time. According to the Tax Foundation, Maryland took $10 billion in federal tax subsidies from this exemption in 2009.

Maryland’s strategy to hike taxes on higher-income earners is even more problematic when you consider that as many as 300,000 of Maryland’s taxpayers are federal workers or retirees. That means that while the rest of the country shoulders the costs of their salaries, Maryland will take the first cut of tax revenue, leaving Maryland residents to pay comparatively less in federal taxes. 

Putting this unfairness aside, women living in the Old Line state—as well as in the rest of the country—should be concerned about this new tax and other efforts to increase higher marginal tax rates.  For example, Governor O’Malley’s tax increase on $100K-plus workers (and families over $150,000) will hit women especially hard.  Women whose high-earning federal employee and contractor husbands will find that their part-time work does little to help the family under this higher tax rate, especially since those higher earnings can result in the elimination or reduction in state exemptions under the O'Malley plan.

Rather than hiking taxes on the so-called rich, policymakers in Washington and state capitals around the country should be working to create a smarter, fairer tax code that encourages work, savings, and investment.