There are two words around here lately that have struck fear into the hearts of government bureaucrats: structural deficit. It seems that our fair Old Line State needs to seriously overhaul its revenue system in order to meet the challenge of the 21st century, because right now we are looking at falling billions short in the next few years. Our new Governor, to his credit, has asked the General Assembly to give him until next year to study the state government, its structure and revenue sources, so that he can propose a comprehensive plan that will streamline government and try to wring out savings there, as well as changes to the revenue structure that will hold tax increases to a minimum. While delay might seem to be a bad choice, the new administration is only a couple months old, and fully realizes that it will bear the political brunt of whatever solution is put in place. Therefore, they want that solution to be as well-reasoned as possible.
But its rare that adjective well-reasoned can be applied to the knee-jerk approach of a Legislature in full throttle. Many in the House of Delegates and the state Senate want to pass taxes now, in the ‘lets bandaid the problem before it starts to make really bad headlines’ approach.
One of the brainchildren of this group-think is a tax on services, like the sales tax which applies to purchases. This, of course, includes real estate commissions. I’m hoping that the Governor is able to hold off the boneheads who came up with this idea.
My commission is already taxed as income, so now they want it taxed before it gets to my hands, an effective way to double tax a profession. As competitive as real estate is, I’m not sure that we would be able to pass this tax along to the buyer or seller of property — commission rates have already dropped significantly in the last decade.
But let’s say our brokerages find a way to pass this along to the buyer or seller. Maryland already is near the top of the list when it comes to real estate transaction expense. All this will do is make buying and selling property even more expensive, and no doubt catapult us to the top of the list of most expensive settlement cost states. That’s a distinction that we don’t want or need.
Local government has reaped an enormous windfall from the real estate boom of the last few years. So has the state treasury. How much gold can they suck from this golden egg, before the hollow shell is crushed?
Stay tuned… the boneheads in Annapolis might just be willing to find out.
4/2/2007 UPDATE:
The legislature did not move this tax onto the floor in either house. Fortunately, the Maryland legislature doesn’t sit in session but from January to April each year, so they have effectively killed the idea for this session. Be thankful we don’t have a year-round session.
