Maryland could lose $5 million a day in tax revenue from federal shutdown, memo says

Maryland Gov. Martin O'Malley (D) outside the Maryland State House last year. (Photo by Aaron C. Davis/The Washington Post)

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Furloughs of federal workers during a government shutdown could cost Maryland $5 million a day in income and sales tax collections and hinder the state’s economic recovery, according to a memo circulating in the office of Gov. Martin O’Malley (D).

Federal employment is a key component of Maryland’s economy, with annual wages totaling about $25 billion, according to the memo, a copy of which was obtained by The Washington Post. It was prepared by O’Malley’s budget advisers in preparation of a congressional budget stalemate continuing into next week.

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If the federal government shuts down Tuesday, state budget officials anticipate a loss of about $42 million in state income tax revenue and $9 million in state sales tax revenue over a two-week period — the equivalent of about $5 million for each shutdown day, according to the memo.

The memo notes that the loss of income tax revenue would be mitigated if federal workers are paid retroactively but says that it is unlikely that all of the sales tax revenue would be recovered.

Federal workers would be expected to spend about $145 million less on “taxable goods” in Maryland than they would otherwise during a two-week period in which they were not paid, the memo says. That would have an impact on businesses across the state and impede the state’s economic recovery, according to the memo.

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