Chairman Hoffman and Members of the Committee:
I am William J. Skinner, president, of the Maryland Taxpayers Association, a non-profit, non-partisan organization of individuals and County Taxpayer Associations. I live in Montgomery County, and by profession I am a pharmacist as well as an attorney. MTA officers and Board members are all volunteers. We have favored repeal of the Maryland Inheritance Tax for several years. The Maryland Inheritance Tax is an unfair tax, one that is intended to punish success, and it is intended to hurt families. This tax particularly hurts small families who work together and it effectively destroys the American Dream. The Maryland Inheritance Tax must be repealed.
Repeal of the inheritance tax and reduction of the estate tax is one of ten major goals of the Maryland Taxpayers Association. MTA’s Board of Directors voted for this repeal a several of years ago, our membership has supported this in our summer surveys, and it is long overdue.
The Maryland Taxpayers Association congratulates the 41 members of the Senate who have joined with Senator Bromwell this year to sponsor the repeal. We know you have been thinking about this repeal for a long time. We are sorry that six Senators have withheld their support at this stage and we hope they will change their minds soon. I am sure they will be wishing that they had thought of the repeal, but MTA is sorry to say that this repeal was not thought of by the Governor and it was not an issue until Delegate Obie Patterson and his co-sponsors put forward a bill for repeal last year. As you may remember last year, I said we would be back for full repeal.
We are told by some legislators that "we can’t afford" to repeal this tax. This means to us that some legislators have their priorities mixed up because the State of Maryland must repeal this tax to make Maryland competitive. In one way or another, a bunch of states have repealed death taxes in recent years. These include: Alaska - 1999, Delaware, Indiana, Kansas, North Carolina - 1998, Connecticut, Iowa, Louisiana, New York - 1997, Massachusetts, Vermont - 1995, Michigan, 1993, and the list goes on and on, so that today Maryland is one of only 13 states with an Inheritance Tax.
This tax brings in only $50 to $75 million a year. Our state makes stupid mistakes that cost that much every year. I would mention the Department of Human Resources Computer for an example, but that is another story.
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Last year, several Senators and Delegates said that "In Maryland we cannot repeal ANY tax in one year, it simply isn’t done." My reply was that this is one more thing that is wrong with Maryland! Maybe Maryland does not know it all and this state should become more like the other states that have repealed this punishment tax in a single year.
Maryland’s General Assembly has not sent a clear signal for many years that it is getting the tax situation under control; Maryland continues to send smoke signals that disappear in the first wind.
Before concluding MTA’s statement on repeal of the Inheritance Tax, let me also add that MTA requests support to meet our other tax goals:
1. Do not increase or designate one-half a percent of the 5 percent sales tax for transportation. This can only result in increasing the sales tax. This is not is a wise solution.
2. Repeal Inheritance Tax. This tax is a punishment for individual and family success. This tax destroys what a lifetime takes to build. It causes much grief, and it is not needed. MTA says get rid of the Inheritance Tax.
3. Property Tax Payments. The Legislature has made a confusing process complicated. Here we are paying our property taxes in advance for the next year and the Legislature wants the counties to get a collection fee (service charge or another tax) on top of the payments if we want to make two installments instead of one. MTA says eliminate the fees and make it easier to declare that we want a single payment, rather than sending in notices every year.
4. Repeal Prevailing Wage laws. This would save $50 million or more if our state capital expenditures are $500 million because this law forces the State to pay union wages when non-union contractors would do the work. In other words, the 10 percent premium or more goes to union workers only, an insider and preferred group in Maryland, and the union gets a percentage of the take -- up to 3 to 4 percent of the wages for dues. This is legalized extortion.
5. Index personal exemptions from income tax to CPI or inflation. Delegate Janet Greenip and others have proposed to require personal exemptions to increase along with an index. Congress did this some years ago and the State should too. Had this been done 20 years ago at the Federal level, the exemption would be large enough that some two earner families would be able to leave one parent home to watch the children. A smart idea, long overdue.
6. Eliminate or exempt from Maryland Income Tax all enlisted personnel in U. S. Armed Services on active duty who are residents of Maryland. MTA wants a better paid armed services to protect our country and our State. Two divisions of the U.S. Army are now not ready for battle, specialists are retiring left and right, and the military is having a difficult time of recruiting. The only laws on the books now say that if you are in a fox hole in a foreign land, the first $15,000 is exempt ,and Maryland will wait for you to get back to pay your taxes. The U.S. Army just dropped its recruitment PR firm for failing to get 1/5th of the 80,000 recruits needed last year.
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Delegate Jean Cryor and others have a bill in the House. Senators Jacobs and Hooper have one in the Senate. Maryland residents who enlist and are on active duty should be totally exempt from Maryland income taxes. Maryland Taxpayers say, Lets do our part.
7. Limit Spending Affordability to CPI, inflation and population. For several years the Legislature and Governor have spent all of the money that comes in, plus borrowed to spend more. Enough is enough. Debt service was up 17 percent last year. Spending affordability as a process does not work. Why not set a lower target for spending so Taxpayers can have some money to invest on their own? Why not cap spending based on inflation, CPI and the population growth? This would allow a tax refund and a tax reduction.
8. Revise or eliminate the municipal share of county income tax money. Cities get 17% of the income tax collected by the counties from their residents. Many cities have surpluses equal to or greater than their annual budgets. If services are not prorated properly in the county, the non-city Taxpayers subsidize the city budgets. And the counties have a harder time scheduling services to work around city services. What a waste!
9. Give counties the veto power over municipal annexation. Cities annex land and in the process destroy county planning efforts. There should be some method for counties to control the annexation of property, and the reduction in income tax revenues from that area (by 17%), so that county-wide planning efforts are not thwarted by impatient businesses, builders, and developers.
10. Oppose targeted income tax exemptions or deductions for those receiving retirement income. MTA was asked what we thought about exempting the retirement of State Police from Maryland Income Tax. MTA was asked about exempting retired Federal employee pensions from income tax. MTA was asked about exemptions for others. The MTA Board decided, "Why not exempt all pensions?" No targeted exemptions for retirement. MTA would support S.B. 285 to give all retirees over 65 years of age and the disabled an exemption.
Only a dozen other states still have an inheritance tax. Many of those have high payment thresholds so that no tax is paid by most persons who inherit from their families. In Indiana, where I was born, my mother's estate and her four heirs do not have to pay inheritance tax on an estate less than $100,000 per heir. That means she can have a $400,000 estate and no one need pay inheritance taxes. Needless to say, small estates will not be paying inheritance tax or deducting inheritance tax from our inheritance because of this threshold level for paying.
Had I moved my mother to Maryland and she had that size of an estate, the children or estate would have to pay the state 1% or $4,000 total, almost enough for another funeral. If there were only nephews and nieces alive in Maryland, they would have to pay $40,000, to keep this property. The state would not have earned a dime of it.
I was born in a poor, but good family. That family does not deserve to be taxed at death, any more than the poor, but good families in Prince George's County, Baltimore City, or anywhere in Maryland.
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Historically, when the inheritance tax was passed, there were hardly any other taxes on individuals and the inheritance tax was truly a tax on the "rich robber barons." It was designed to get the money from the
Vanderbilts, Morgans, Rockefellers, and later, Howard Hughes. Today, we have the income tax, property tax, sales tax, corporate tax, excise tax, special fees and taxes of all kinds. We no longer have a societal need to punish every person who works hard, every family who works together to own a farm, a store, or another business. But we, as a people, and the Maryland General Assembly, are so stupid of history that we have let this inheritance tax have a life of its own.
The inheritance and death taxes, along with the income tax, are products of the same era as socialism and communism. Only the intellectual sympathizers with these radical ideas promoted the inheritance tax, and we have come far beyond that time and proved that capitalism works better. Why not repeal these onerous taxes, one by one, until we get back on track. It is the hard work of people that make this Country grow -- not the government that legislates, regulates, enforces and stagnates growth and success.
While many people assume that America is a tax haven from the rest of the world, where you can work toward the American Dream and build a future with good, solid income, build a company, and have a long and healthy retirement, the United States has collected more death taxes than any other country in the World for many years. Of all countries in the world, only the United States Embassies have staff people who hound Americans for inheritance and death taxes.
Former Treasury Secretary Ruben was asked about estate taxes a couple of years ago, and he replied that there was no injustice in imposing death taxes because, in fact, the government was willing to let the citizens keep some of their property -- implying that government could take it all if it wanted to. This, of course, was repeated in another way by President Clinton in Buffalo, New York, a few months ago, when he said, he did not recommend that the country give the surplus tax revenues back to the Taxpayers because "We" might not spend it right. This means to many people that he thinks our "property" is really his property. What do you think?
Most people do not have any idea how much the inheritance tax affects the Maryland budget. Ask some of your constituents, "What is done with the inheritance tax?" "How much do we collect?" I do not believe they will know. They may not even know there is an inheritance tax. Because it comes after death, the punishment tax is also a stealth tax.
The inheritance tax revenues when added to the estate tax revenues amounted to $127 to $135 million per year over the past three years. This total is only 3 per cent of the income taxes collected in those same years. The inheritance and estate taxes would never be missed if you repealed both.
And repeal would mean that some people might stay in Maryland for their retirement years and decide to die here rather than a less death-taxed state. According the the Baltimore Sun, only 13,000 people would be helped by repeal. MTA says saving those 13,000 people $50 million is a good thing to do.
Repeal of inheritance taxes would mean that people would not have to worry about losing the family asset, whatever it is, upon the death of a family member who worked a lifetime to pay for and support his/her family.
MTA will recognize and thank those Senators who listen and act in the Taxpayers’ interest. We appreciate the opportunity to make this statement in support of repeal of the Maryland Inheritance Tax.
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