Maryland Democratic gubernatorial nominee Ben Jealous proposed cutting the state sales tax Thursday from 6 percent to 5.75 percent, a change he says would boost the state economy and perhaps draw attention away from Republican Gov. Larry Hogan’s anti-tax message.
Maryland has the highest sales tax in the region, compared with 5.3 percent in Virginia and 5.75 percent in the District, where it will increase to 6 percent in October.
“Our economy is stuck,” said Jealous, a former NAACP president who spent the past five years as a venture capitalist with socially conscious Kapor Capital. “We’ve got to do something bold if we are going to get our economy going again.”
The proposal from Jealous is different from any tax cut plan offered by Hogan, who defeated then-Lt. Gov. Anthony G. Brown in 2014 by promising to roll back tax increases enacted under Democratic Gov. Martin O’Malley. In office, Hogan has proposed a number of tax-reducing initiatives, several of which were defeated by the Democratic-majority legislature.
The governor — who is significantly ahead of Jealous in fundraising and polls — has cut taxes on retirement income for veterans and law enforcement officers. He recently renewed his call to exempt retirement income from Maryland taxes for all retirees in the state.
Hogan and the Republican Governors Association have sought to attack Jealous on the issue of taxes, saying he wants to raise taxes to pay for expensive policy initiatives such as universal health care and prekindergarten.
On Thursday, Hogan’s campaign reacted swiftly to Jealous’s sales tax proposal, calling it a “desperate” attempt to win votes and outlining cuts the governor has made to tolls and various fees and taxes since taking office.
Hogan criticized Jealous for proposing a reduction in the sales tax after previously saying that he would consider a sales tax increase, among other methods, to pay for a portion of his health-care initiative.
“It’s funny because last week he was calling for an increase,” Hogan said before appearing with regional leaders at a business forum. “He can’t seem to make up his mind, but I wouldn’t take it very seriously.”
Jealous’s campaign countered that Hogan has not made any across-the-board tax cuts since he took office.
“This is a broad-based tax cut,” said Kevin Harris, a senior campaign adviser for Jealous. “Larry Hogan promised people that he would dramatically reduce taxes, and it’s clear that he has not done that. There is one person in the race with a plan to reduce taxes that impacts everybody, and that’s Ben.”
During a Thursday morning news conference, Jealous did not entirely rule out the possibility of raising the tax rate at some point.
“It’s a hypothetical possibility that a panel created next January might, two years from now, consider possibly several options, which might include, maybe, a sales tax increase,” he said, laughing. “But I have not advocated for a sales tax increase. I have a white paper on the possibility” of raising it for health-care costs.
Lowering the sales tax rate by a quarter point is projected to cost the state as much as $193 million a year, which Jealous said could be replaced with revenue from a new tax on out-of-state online retailers, such as Walmart, and by closing a tax loophole used by hedge fund managers to avoid paying taxes on investment income.
“We need a tax system in Maryland that is fair,” Jealous said. “It’s not fair that hedge fund managers pay a lower rate than their secretaries. It’s not fair that Walmart doesn’t pay its fair share of state taxes, and every small business in the state has to pay.”
Hogan’s deputy campaign manager, Doug Mayer, said the governor plans to use the online sales tax revenue for education and questioned how Jealous would cover the cost of all his plans if he cuts the state sales tax. Hogan had never previously said how he would use the revenue from the online sales tax.
Del. Joseph C. Cluster (R-
Baltimore County) this year proposed legislation to reduce the sales tax to 5 percent, which would have cost $701.8 million in 2019, according to state legislative analysts. The measure died in committee.
Jealous’s sales tax proposal is part of a larger plan he unveiled Thursday to help the state economy. He said that as governor, he would push to create a “small-business bill of rights,” which he says would ensure that companies are not treated unfairly by lenders and lawyers; increase public investment in start-up companies; and create an executive-branch office aimed at attracting and retaining tech companies.
Robert J. McCartney contributed to this report.