Published on January 31, 2019
With more than 2,500 pieces of legislation proposed in the 90-day 2019 Maryland General Assembly session, it can be hard for business owners to identify the big issues that might affect them.
Here, we identify four key pieces of legislation that, if passed, could have a dramatic effect on Maryland businesses.
As of January 1, 2019 (and since 2014), the minimum wage in Maryland is $10.10 per hour.
According to the National Conference of State Legislatures, Maryland is one of only 15 states that has a minimum wage above $10, but many states have enacted legislation to steadily increase it over the next three to five years to as much as $15 per hour.
There were several proposals in Maryland last year to increase the minimum wage to $15 per hour, but none of them became law. Some of these proposals would tie the state’s minimum wage to the Consumer Price Index, which would mirror the approach taken by several other states.
Larry Richardson, vice president of government affairs for the Maryland Chamber of Commerce, is hesitant about tying the state’s wages to an economic indicator, saying, “As it was structured, if the cost-of-living goes up, the minimum wage goes up. If it’s constant, the minimum wage is constant. What if 2008 repeats? The minimum wage stays constant. It can’t be reduced. It ends up leading to layoffs instead of wage cuts.”
The Center for Economic and Policy Research concluded in its 2013 study, however, that there was “little or no employment response to modest increases in the minimum wage.” This study indicated that wage compression (the reduction in wages of higher earners) and small price increases, among other adjustments, were the most likely consequences of an increase in the minimum wage.
At the same time, representatives at the federal level are considering raising the federal minimum wage, which currently stands at $7.25 per hour. The federal wage has not increased since 2007, and 19 states, including Pennsylvania and Virginia, have the same minimum wage as the federal rate.
The corporate tax rate for 2018 in Maryland is 8.25%. Several states have either no corporate income tax, a flat tax, or progressive rates starting around 2%, with others as high as 10%. Nine states have a corporate rate that equals or exceeds Maryland’s. Nearby, the District of Columbia’s corporate rate is 8.25%, Virginia’s is 6%, Pennsylvania’s is 10%, and Delaware’s is 8.7%.
The Maryland Chamber of Commerce wants the General Assembly to lower the state corporate income tax to 7%. State policy analysts estimated the proposal, which decreases the rate over five years, would reduce state revenue by $466 million by fiscal year 2023.
For the first time in 2018, federal law will have a deduction for qualified business income, and there is a proposal to extend a similar benefit for “pass-through” entities for Maryland purposes.
Proponents indicate that the state’s tax environment needs to be more attractive for businesses while detractors argue that the state has significant financial responsibilities and that a cut to the corporate tax would be detrimental to those objectives.
In May 2018, the U.S. Supreme Court cleared the way for legalized sports betting.
Maryland’s neighbors, Pennsylvania, Delaware and West Virginia, already have legalized sports betting and the District of Columbia passed a bill in December.
Maryland’s General Assembly will need to pass a constitutional amendment that would be placed on the ballot in November 2020. Representatives will need to consider many competing scenarios balancing the increases in tax revenues, which have been estimated to bring in between $14 and $182 million, with the locations where betting would be allowed and types of betting that would be available to individuals.
Maryland Governor Larry Hogan “has previously expressed support for the rights of states to make this determination,” according to spokeswoman Shareese DeLeaver Churchill.
The owners of MGM National Harbor said in a statement that they are “working to ensure that Maryland legalizes sports betting as quickly as possible so that residents can take advantage of a legal, well-regulated sports wagering market. If Maryland doesn’t quickly address this issue, surrounding states will, and Maryland will lose an important competitive edge.”
The threat of legislation exists, once again, to impose a Maryland sales tax on professional services. If passed, businesses will have to pay tax on services from law firms, accounting firms and other professional service providers. Our friends at the Maryland Association of CPAs argue vehemently that this tax would be complex to administer and negatively affect small businesses. Large businesses often have in-house staff who can research and implement a program to comply with new or changing tax laws. However, most small businesses would need to outsource this function, adding an expense that they don’t currently have.
If you would like to contact your representative in either the Maryland House of Delegates or Senate about any of these issues, you can use this website to identify your representative based on your address. Contact information is also available through the website.
Our CPAs are tracking these key pieces of legislation. Contact us online for help or call 800.899.4623.
Published on January 31, 2019