ANNAPOLIS – Maryland comes out better than other states in how it taxes the income of its poorest citizens, according to a new study by the Center on Budget and Policy Priorities.
But when the filing deadline rolls around in one month, working poor families in 20 other states will have to pay taxes on earnings even if their incomes are below poverty level, the study revealed.
Maryland is one of nine states that doesn’t tax the income of poor families and offers refunds through tax credits.
Here, a single family of three with an income below $24,000 doesn’t pay income taxes. But in neighboring Virginia the same family would have to pay income tax even with earnings as low as $5,400.
“Maryland has something of a history of making balanced tax changes,” said Steve Bartolomei-Hill, director of the Maryland Budget and Tax Policy Institute. “When times are good the Legislature cuts taxes. They usually cut taxes in a way that helps poor people.”
According to officials with the Maryland Budget and Tax Policy Institute the tax credit is the primary reason Maryland’s working poor families fare better than poor families in other states. The state credit was created in 1987 and it copies federal legislation aimed at helping poor families working to make it without assistance.
“The low-income tax credit actually returns money to families with children,” Bartolomei-Hill said. “The earned income credit is an important tool for achieving fair tax practice. Maryland is a model for the region.”
The study examined tax procedures for 42 states and ranked them according to how harshly poor families are taxed. Alabama was worst in its tax treatment of the poor, while Maryland ranked among the best.
“Maryland has not taxed poor people in a long time,” Bartolomei-Hill said. “Many other states don’t have a record of balancing their tax cuts for all incomes.”
Maryland legislators are trying to increase the tax credit that refunds money to the poor. Because the state had a significant decline of welfare caseloads and a budget surplus, some lawmakers say they can use the extra money to help those with low incomes.
But opponents say Maryland is too generous in its giving to the poor.
“In some counties you can actually get more money than people who work and pay taxes,” said William J. Skinner, president of the Maryland Taxpayers Association. “We keep wanting to do more for certain poor and I think we’ve gone overboard… reckless spending is going to be bad for taxpayer health.”
Although Maryland is soft on the poor when taxing income, other kinds of taxes favor the wealthy, Bartolomei-Hill said.
“I wouldn’t want people to look at the Maryland income tax relative to other states and feel complacent or satisfied that the state treats low-income people favorably,” he said. “Lower income families in Maryland are still taxed more heavily than the rich because of sales, property and other taxes.”