In the State of Maryland, April Showers Bring More Taxes

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Never underestimate the creativity of state lawmakers when it comes to finding creative ways to grab more of the taxpayers’ money.

Governor Martin O’Malley of Maryland recently signed into law a “rain tax.”  Officially known as the “Stormwater Management fee,” it was approved by the state legislature last year. This new tax is intended to cover the cost of a $14.8 billion unfunded Environmental Protection Agency mandate to Maryland, which directed the state to take measures to reduce the nitrogen and phosphorus levels in the Chesapeake Bay estuary. The increase in contaminants is being blamed on excessive stormwater run-off. Maryland has ordered its 10 largest counties to raise the money, so each of them will be putting a local “rain tax” in place by July 1, 2013.

This new law requires that individuals, businesses, charitable organizations, and even houses of worship pay a fee (tax) based on the amount of “impervious surface” on their property. These surfaces would include roofs, driveways, patios, sidewalks, parking lots, or anything else that would impede rainwater from passing directly into the ground, thus causing the run-off. As you might expect, state lawmakers exempted government-owned property from the program. A special council is now working on developing a rate plan based on square footage, and the government will use satellite imagery and geographic information systems to calculate the total amount of “impervious surfaces” on a property. The tax will be added to property taxes based upon the amount of rain that fell on the property during a predetermined period.  Who would have ever dreamt that the “Big Brother” of George Orwell’s classic novel 1984, published in 1949, would eventually evolve from a fictional entity to a non-fiction one?

So, how will the state spend the funds? Well, first Maryland will need to put yet another bureaucracy in place. Its job will be to administer and manage the plan. There will be required inspections, plus monitoring and enforcement of the program. Whatever money is left over could then be used to build and maintain stream and wetlands restoration projects, or any other related project the state deems necessary.

Once again, businesses will take this one on the chin. Their roofs and parking lots may represent 95% coverage of their properties. Plus, the state is already saddled with extremely high taxes; IRS data shows that during the period from 1995 through 2010, the Maryland lost $6.5 billion in net adjusted gross income. This ranks the so-called “Free State” 12th in the nation for AGI lost. More and more of the population is leaving, and companies are relocating their operations to more tax-friendly environments, like Florida and North Carolina. This is clearly illustrated in an annual survey of business executives conducted by ChiefExecutive. Net, which determines (by state) the best and worst environments for conducting business and for encouraging business development. In 2012, the state of Maryland was ranked 40th on this list, dropping another three slots from its 2011 results.

Vocal critics agree that the fees impose a financial burden on Marylanders across the board, while the state struggles to recover from the recession. They argue that it is unreasonable to expect cash-strapped citizens to pay these fees when they also have to contend with increased gas, cigarette, payroll, and income taxes. Let’s face it: You can stop smoking, and you can take the bus, but as the song asks, “Who’ll stop the rain?”