Maryland State Income Tax Return

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This July 24, 2018 file photo shows a portion of a U.S. income tax return form 1040. (Mark Lenihan/AP)

Maryland State Income Tax Return

Baltimore attorney Eric Hontz has heard that some high-tax blue states like Maryland aren't expected to fare well under sweeping changes to the federal tax code enacted by President Donald Trump and congressional Republicans in 2017.

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But the 36-year-old Reservoir Hill resident didn't realize how much trouble he was in until he started paying his taxes.

Hontz estimates he will pay thousands more in taxes this year than last year — a burden he says will force him to rent a room in his family's home.

"It's the continued destruction of the millennial generation," he says. "The ones who seem to have the hardest time are dual-income couples."

Across Maryland, many people are getting similar bad news when it comes to paying their taxes. The state's average year-to-date tax refund is down about 6.1 percent — to $983 — from last year, according to the comptroller's office, a decline the revenue director calls "remarkable."

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"It will be interesting to see what happens as more people in the tax base learn about this and become more vocal," said Andrew M. Schaufele said.

Sweeping changes to the federal tax code — and state legislation passed last year by Maryland's Democratic leadership and Republican Gov. Larry Hogan — have resulted in lower or no change in taxes for one in 10 taxpayers in the state, or 280 people. , 000 people, their total tax bill will rise this year.

Overall, about a quarter of Maryland taxpayers — about 28 percent — will likely pay more in state taxes when they file their 2018 returns, which are due April 15, Schaufele said. 400 million dollars.

And if those residents don't properly navigate the new tax law to get the most out of it when filing their returns, more Maryland taxpayers — as many as 900,000 — could end up with a tax hike, Schaufele said. He estimates that people who will be negatively affected by the tax changes will come from almost all income groups, but the hardest hit group will be taxpayers with incomes between $25,000 and $50,000.

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Complicating matters is that, in response to the tax overhaul, some employees and employers adjusted the amounts withheld from wages to account for changes under the new tax law. This means that they got a bit more in payment last year, but this now results in a smaller return than expected. The average federal tax return fell 8.7 percent, according to the Internal Revenue Service.

Steve Wiens, owner of a 12-office Jackson Hewitt franchise in the Baltimore area, said most Marylanders are seeing lower refunds, not higher taxes. "It's just that they have that money all year," he said.

However, when they do their taxes, some Marylanders realize they are in the roughly 10 percent who owe more. Some say they have to cancel family vacations. Others say they struggle to pay for medical services. Some are just marked.

That includes Michael McDonough, 80, of Catonsville, who got a federal tax cut of about 10 percent — but his gains were wiped out by a more than 20 percent increase in state taxes.

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"I'm mad as hell and I can't take it anymore," said McDonough, a retired account manager who traveled to Annapolis this week to sound the alarm. "It's unconscionable that nobody on either side of the aisle is doing anything about it."

35 angry taxpayers showed up at the State House last week to raise awareness of the issue and pressure the General Assembly to pass legislation aimed at solving the problem. Washington County Republican William J. The legislation, sponsored by Wivel, would allow individuals to itemize deductions for state income tax purposes even if they don't itemize them on their federal return — a change to state tax code. Marylanders receive $155 million less in taxes annually.

“How many of you are in favor of raising taxes on middle-class taxpayers?” Paul Schwartz, chairman of the Maryland legislative branch of the National Association of Retired Federal Employees, asked lawmakers during a House Ways and Means Committee hearing on the bill.

"Where did this money come from?" That's money from the impact of the federal tax plan on taxpayers in a blue state like Maryland. It's our money and we want it back.

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At issue is the impact of the Maryland Federal Tax Cuts and Jobs Act of 2017, which made significant changes to federal law — taxing income at a lower rate by changing tax brackets; expanding the child tax credit; It almost doubles the value of the standard deduction.

The big winners of the tax plan, which provided tax breaks for most Americans, included corporations and the wealthy. The law adversely affected some Maryland taxpayers, including those who typically itemize deductions on their tax returns. Under a new federal law, many people now benefit from paying the standard deduction on their federal return. But under current state law, only taxpayers who itemize for federal income tax purposes can itemize on their state income tax return.

It also struck down a provision in the law that limited the deduction of state and local taxes on federal returns to $10,000 for taxpayers in the high-tax state of Maryland. Under the previous tax law, there were no restrictions.

"Your income doesn't have to be very high before you start limiting," said Susan Keller, director of the tax department at Ellin & Tucker, which specializes in high-net-worth clients.

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After Congress passed the bill, Governor Hogan, Speaker of the House Michael Bush, and President of the Senate Thomas W. Mike Miller and others have said they will try to do more to protect Marylanders from state taxes. Also, at the start of the 2018 legislative session, both chambers in Annapolis unanimously passed legislation to ensure that Marylanders can claim their individual exemptions. That bill benefited about 92 percent of Maryland taxpayers — and eliminated what would have been a $1.2 billion increase in state and local taxes.

But instead of protecting all taxpayers, Democratic lawmakers crafted a plan — with Hogan's blessing — that would result in at least $200 million in higher state taxes stemming from the federal law. Lawmakers decided they needed to withhold money to increase state aid to local school systems as Maryland moves to implement the Kirwan Commission's recommendations. Country.

Lawmakers are also concerned about potential deficits for the state. The Legislative Services Department projects a structural deficit of $900 million by fiscal year 2021.

Hogan initially sought to address the strategic issue of eliminated deductions at the federal level by attempting to "decouple" Maryland tax code from federal law and preserve many deductions that benefit Maryland taxpayers.

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The bill quickly ran into trouble in the Senate after the comptroller's office predicted the complex changes would cost Maryland millions of dollars in taxes it was already collecting. A Senate committee decided to repeal the Hogan bill and instead approved two bipartisan tax-cut bills: raising the standard deduction by $250 for individuals and $500 for married couples, which provided a small tax cut but not enough to cover all taxpayers; Another allowed certain young adults without dependents and working adults with low incomes to benefit from the government's Earned Income Tax Credit. Those bills provided tax cuts to various taxpayers totaling $100 million.

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Wivel said more needs to be done. "Inaction on this issue is having a negative impact on our constituents," he said, adding that he is hearing from many people who have had to adjust their lifestyles [including medical expenses].

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The Smithsburg lawmaker said he realizes his bill has no chance of passing unless he can convince Democrats to join him. He said that taxpayers should contact their representatives directly to make this happen.

"I'm a Republican in a sea of ​​Democrats" in the General Assembly, Wywell said. "If people don't complain to their legislators about it, it's not going to go anywhere." If people take weapons, they must be notified. "

Hogan spokeswoman Amelia Shays said: “The tax is going down

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