On July 5, 2016,
the Tax Foundation released a report entitled “State and Local
Sales Tax Rates, Midyear 2016.” The authors, Jared Walczak and Scott
Drenkard, ranked states (and the District of Columbia) by their combined state
and local tax rates of the first half of 2016.
Five states do not
impose statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and
Oregon. Of those that do, Louisiana has highest combined sales tax rate at
9.98%. Maryland ranks towards the bottom at 38th with a combined
sales tax rate of 6.00%.
Maryland’s sales
tax ranking should be applauded. FSF scholars have been critical of long-standing
Maryland tax and
regulatory policies
for several years, so it’s good to be able to commend this particular element
of Maryland policy. However, as the Tax Foundation’s report states, sales taxes
are fairly transparent revenue collections because consumers can see their tax
burden on the receipt of every purchase they make, while the real impact of income
and corporate taxes can be much more complex and murky.
The Tax Foundation
published a report earlier this year ranking Maryland with the 7th
highest overall state and local tax burden due to a combination of personal
income tax rates, corporate tax rates, and “sin” tax rates. In other words,
Maryland’s state and local sales tax rates are not the problem, although this
does not mean that they could not be reduced. But in order to improve its general
fiscal health
and economic climate in a way that fosters growth, Maryland needs to reduce
its personal income and corporate tax rates. If it did this, it would improve
its ranking among the states with regard its overall tax burden – thereby
incentivizing more entrepreneurial activity and economic growth within the
state.
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