WASHINGTON – Maryland’s working poor face one of the lightest income tax burdens in the nation, according to a report scheduled to be released Thursday.
The report by the Center on Budget and Policy Priorities credited Maryland’s standing to a new tax refund for working poor families, which will be felt in tax returns filed this spring, and to tax breaks for residents living near the poverty line.
“Maryland has generally treated its poor families better than other states” when it comes to the income tax, said Elizabeth McNichol, director of the center’s State Fiscal Project and co-author of the report.
The report said Maryland tied with Minnesota for the second-highest income that a single parent of two children can earn before having to pay income tax. Such a family could earn $23,700 in Maryland before incurring any income tax liability in 1998.
Among the 42 states that levy an income tax, Maryland had the sixth- highest income tax threshold for a family of four: $24,300, or 46 percent more than the federal poverty level of $16,655 for the same family.
That is an improvement from 1991, when a Maryland family of four could be hit with income tax once its income went more than 13 percent above the federal poverty line.
The report said six states — Virginia, Alabama, Hawaii, Illinois, Kentucky and New Jersey — levy income tax on residents who earn less than half the poverty level.
But a spokesman for the National Taxpayers Union said that Maryland does not fare so well when the state’s total tax burden is considered. Pete Sepp said working poor families may be better off overall in Virginia, for example.
“It would help them if there were not so many other taxes that hit them so hard,” Sepp said. “They [the working poor] might not be paying a great deal in income tax, but if they drive a car or like to smoke or just happen to like buying snack food in Maryland, they are paying a steeper penalty every day.”
Sepp said that while working families in Maryland may receive a refund or pay less in taxes now, they have “had the wool pulled over their eyes.”
Frank DiPaula, a tax preparer for H&R Block in Overlea, said he has done a “handful” of returns this tax season that have qualified for the new refunds for the working poor. “I haven’t had too many because the tax liability has been too high, DiPaula said.
Of the returns he has prepared, he said that the refunds were typically under $100. “I’m sure it does help, but not much,” he said.
But Steve Bartolomei-Hill of the Maryland Budget and Tax Policy Institute said that while the refunds are not very large when a family does not earn a lot, they can “give a boost to families” that eases the costs of transportation, day care or other daily expenses.
“It is difficult for people who make a lot of money to understand what another $200 means to a poor family. The amount of pay that they will receive is modest, but certainly it helps,” Bartolomei-Hill said.
“The state wants to support low-income working families. It doesn’t make much sense to encourage them to work and then levy taxes on them and push them back down,” he said.