This article has been saved to your Favorites!

Md. Gov. Urges Pandemic Aid, Retirement Tax Relief

By Daniel Tay · February 4, 2021, 3:11 PM EST

Maryland's governor urged the state General Assembly to pass his $1 billion stimulus and tax package swiftly and proposed retirement tax relief for the second year running in his State of the State speech.

In an address livestreamed Wednesday, Republican Gov. Larry Hogan asked state lawmakers to pass his pandemic relief proposal, which is titled the RELIEF Act, as soon as possible. The proposal, which was introduced as S.B. 496 and H.B. 612 in the legislature, would repeal all state and local income taxes on unemployment benefits.

"There is absolutely nothing more important for the legislature to do, and Marylanders simply cannot afford to wait," Hogan said, calling the proposal the state's top legislative priority.

S.B. 496 was amended in the Senate on Wednesday to provide for a Recovery Now fund, which would provide funding to about 30 agencies, including the Juvenile Services Education Program, the Maryland State Arts Council and the Maryland Economic Development Assistance Authority and Fund.

Hogan also proposed tax relief for retirees for the second year in a row, floating more than $1 billion in retirement tax relief. Hogan said Marylanders are fleeing the state because of its "sky-high" retirement taxes and added that the current situation meant state residents, now more than ever, need to be able to keep more of their money.

The RELIEF Act would extend an emergency order Hogan issued in December to allow the calculation of a small business' unemployment tax rate for 2021 to be based on fiscal years 2017, 2018 and 2019, excluding fiscal year 2020. Between his emergency order and the new relief he is proposing, small businesses would get $326 million in benefits, according to Hogan.

The act would also provide sales tax credits for businesses for as much as $12,000 over four months. Hogan said this would help 55,000 small businesses with a total benefit of $300 million. The governor also proposed banning any tax increases on income received via state loans or grants.

Hogan's plan would give low-income Marylanders an additional stimulus in addition to the $600 provided for in the federal Consolidated Appropriations Act , which was enacted in late 2020. The stimulus money would be available to families and individuals filing for the state earned income tax credit.

The state stimulus would come in two waves. In the first, families who claimed the credit in tax year 2019 would get $500, and individuals would get $300. In the second, families who will be eligible for the credit in 2020 would get an additional $250 and individuals an additional $150.

Maryland Comptroller Peter Franchot, a Democrat, criticized aspects of Hogan's RELIEF Act in an op-ed article published online Tuesday. According to Franchot, who is running for Maryland governor in 2022, the direct stimulus payments would not be enough. Franchot also said the proposal to provide for up to $12,000 in sales tax credits looked impressive but would not provide much relief in reality because businesses' sales tax bills are not that high. He added that about 50% of small businesses in Maryland would receive $500 or less from the governor's relief package.

Additionally, Hogan's plan for stimulus payments would leave out families that do not use Social Security numbers to file, Franchot told Law360.

"These are mostly immigrants who are paying millions of dollars in taxes, but because the federal government doesn't allow them to claim [the earned income tax credit], they would not be included in the governor's proposal," Franchot said.

Hogan's office and party leadership in both legislative chambers did not respond to requests for comment.

--Additional reporting by Maria Koklanaris. Editing by Vincent Sherry. 

For a reprint of this article, please contact reprints@law360.com.