ANNAPOLIS, Md. (March 7, 2018) - The Board of Revenue Estimates voted today to decrease the revenue projection for the State of Maryland for Fiscal Year 2018 by $39.4 million and to increase the projection for Fiscal Year 2019 by $433.6 million.
The FY 2019 revision is largely the result of federal tax reform that is expected to produce a large uptick in state revenues. However, the projected increase also masks estimated reductions to withholding and sales taxes, which reflects a continued sluggish economic recovery and an uncertain fiscal future.
Following the vote, Comptroller Franchot released the following statement:
“Today, the Board voted on a recommendation to decrease the revenue projections for the State of Maryland for Fiscal Year 2018 by $39.4 million, and increase our projection for Fiscal Year 2019 by $433.6 million.
These new estimates are heavily influenced by the Tax Cuts and Jobs Act passed by Congress and signed into law by President Trump. While I am optimistic about this considerable increase in the General Fund, I want to offer a note of caution, as there are two stories to tell.
First and foremost, our revenue estimating team reports a 34 percent growth in our fourth quarter estimated payments, which was highly unusual. This is three times what we would normally witness. Attempting to determine if this was an intentional taxpayer strategy to pay tax bills in full in an effort to receive a vast federal refund before that option is gone — or something else entirely — remains to be seen.
Another concern with the new tax code is what I call Sticker Shock. While the potential federal refund may be tantalizing, citizens used to getting a state refund might not get one or may end up owing money. For those living paycheck to paycheck, this could be devastating.
In addition, this overall revenue windfall is masking another economic reality: reductions to both withholding by $30 million and sales tax by $15 million annually. Serving as a reminder that Maryland is still feeling the long tentacles of the Great Recession pulling down our economy. This is a true-up to our underlying wage and retail sales tax base that are small in the grand scheme of things, but reflective of lethargic wage growth and subdued consumer spending.
The bottom line is we continue to tread uncertain fiscal waters. Businesses both large and small still need to determine how best to navigate these new tax laws that appear on the whole mostly beneficial.
Time will bear out the reality and inform us on future spending and deficit ratios. With just a little over a month until the legislature adjourns for the year, I once again urge legislators to reject any proposals that would increase or create taxes and fees because we need to provide some stability and relief for our working-class citizens and small businesses.
I am confident that if we continue on the current path of fiscal prudence, we will be well-positioned to emerge from these economic and fiscal uncertainties stronger than before and we will be properly prepared to weather future disturbances in our economy.
Let me thank my colleagues on the Board, Secretary Brinkley and Treasurer Kopp as well as BRE Director Andrew Schaufele, the BRE staff and all the members of the Revenue Monitoring Committee for your diligent work in preparing this report.”
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