Marylanders will have to pay some kind of a new sales tax in the next state budget, but it’s not clear what it will look like.
A new tax on services “has to be” in the final budget, according to Senate President Bill Ferguson.
“The revenue has to be accounted for,” he said, adding that the framework is still being negotiated to balance the state’s budget amid a $3.3 billion deficit.
Ferguson faced several questions from reporters Tuesday, as they asked him to clarify the future of the controversial business-to-business tax.
Gov. Wes Moore on Monday said a “broad” tax on business-to-business services wouldn’t move forward, but he didn’t say what the final policy could look like.
Asked again Tuesday what he considers a “broad” business services sales tax, Moore did not specify.
The Democratic governor instead reiterated his position and his budget goals of providing some relief to the middle class, strengthening the business climate and making investments in Maryland’s economic growth.
“Things like broad [business-to-business] sales taxes and things like the sugar tax and soda tax, that will not be in the final budget because I will not sign anything that has them in there,” Moore said after attending a state-run job fair for fired federal workers in Frederick County.
The business-to-business sales tax, proposed by Democrats late in the legislative session to help resolve Maryland’s growing budget deficit, would have charged 2.5% on certain professional services exempt from the state’s 6% sales tax.
While the “broad” tax won’t be in the final budget, Moore administration officials said some type of sales tax on services remains on the table and that it could apply to services that independent consumers pay for, though conversations about the final policy are continuing.
The original tax proposal, offered by lawmakers as an option in the final stretch of budget negotiations, was estimated to generate about $1 billion in new revenue.
But as further details are still being negotiated, officials are weighing what could be the least disruptive for future economic growth in light of substantial backlash from business owners about the original proposal.
“I tried to reiterate from the beginning, it was a menu [option], which you don’t eat everything on the menu — you pick and choose from the menu,” Ferguson said. “I think we’re looking at a more narrowly tailored approach with the business-to-business [tax] that really is about a modernized economy.”
Asked if the Senate’s tailoring would include expansion of a services sales tax beyond businesses and directly onto consumers, Ferguson said it was “still in conversation.”
Ferguson did not offer specifics on what services a tax could apply to, though.
Republicans in the legislature have objected to new tax and fee increases throughout budget deliberations, instead calling on Democrats to prioritize slashing spending.
“The General Assembly should refocus its efforts on cuts — making deeper reductions to the Blueprint, implementing a state workforce hiring freeze and right-sizing government before we ask businesses and individual taxpayers for a bailout,” Senate Minority Leader Steve Hershey, an Eastern Shore Republican, said in a statement.
Ferguson, however, emphasized the legislature’s goal of passing a budget that protects Maryland from federal impacts.
“We want to make sure that Maryland is a place where economic growth can happen, no matter what,” he said. “That means investing in people, investing in infrastructure and doing the best to help private industry succeed, and we’re trying to do that in the context of an overarching federal government that is totally uncertain.”
Sam Janesch contributed to this report. Have a news tip? Contact Natalie Jones at najones@baltsun.com.