In May of this year, Maryland’s government approved a tax increase for taxpayers who earn above a certain dollar threshold. For Single filers, that threshold is $100,000 and for Married Filing Joint filers, the threshold is $150,000. Basically, if you are earning over six-figure salary and you live in the State of Maryland, your state tax rate will increase by 0.25%. Maryland now ties DC with 8.95% as the highest marginal tax rate.
While there was much divide among the Maryland lawmakers from both parties, the Governor was able to get the tax increase passed. The Governor’s primary reason was to increase revenues for the state’s continued focus on investing in education.
Many government officials worry that this will drive even the most loyal Marylanders across the river to Virginia. In comparison, Virginia’s income tax rates are very low with its highest marginal tax rate being 5.75%. The primary reason is that Virginia does not have a local income tax, whereas Maryland does. Maryland’s local tax rates range from 1.25% to 3.2% and Montgomery County’s rate is at 3.2%.
This leads to the question of how much Maryland residents will pay for the privilege of Maryland state residency. It has been proven that Maryland loses a significant portion of its high-income earner tax base when it increases its tax rates. It’s happened before from the years 2007 through 2010. So, time will tell whether this additional 0.25% will have the same effect.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE WOLF GROUP TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
