Why do Maryland Counties Also Charge an Income Tax?

[NIU_Huskies]

As a one-year old resident of Maryland, can someone explain to me why Maryland has a "state" income tax rate and then each county in Maryland gets to charge its own income tax rate (Charles County is 3.03%)?

I assume most Maryland citizens fall in the 4.75% state income tax bracket ($3,000 - $100,000), since it appears to be the catch-all bracket. So if you live in Charles County you are paying 7.78% in income taxes. That's absurd!

Is the general "state" income tax not going back to the counties? We already pay property taxes which are supposed to fund the county's services. Of which, Charles County has the 2nd highest property tax rate of all counties in Maryland, which i find interesting considering Montgomery County has better schools.

I've never heard of a local income tax until Maryland. I've lived in Virginia, California, Illinois, Indiana, etc.

Has there always been a "county" income tax? Has anyone in Maryland politics every suggested getting rid of it? Just trying to get educated on Maryland tax rules and what led to their current existence.

 

[NorthBeachPerso]

The Counties charge an income tax because they do. That's one of the reasons Maryland is considered a high tax state (and the County IT is ignored, either because of ignorance of it or trying to be deceptive when some of the cheerleaders get going).

As to why, it's an income stream. Other states do have a local income tax, PA is one, although the rates are all over the map and tied into gambling money somehow.

Part of the reason for high property tax rates almost anywhere is an imbalance between commercial and residential growth. In the case of Charles (and Calvert for that matter) residential growth and population far outstripped commercial growth with many of the new residents keeping their jobs in DC and its environs. I don't know the Charles number, but I'll bet it's similar or higher, but over 60% of Calvert residents commute outside the County for work. There are few home grown industries in much of Southern Maryland.

 

[NTNG]

As a one-year old resident of Maryland, can someone explain to me why Maryland has a "state" income tax rate and then each county in Maryland gets to charge its own income tax rate (Charles County is 3.03%)?

I assume most Maryland citizens fall in the 4.75% state income tax bracket ($3,000 - $100,000), since it appears to be the catch-all bracket. So if you live in Charles County you are paying 7.78% in income taxes. That's absurd!

Is the general "state" income tax not going back to the counties? We already pay property taxes which are supposed to fund the county's services. Of which, Charles County has the 2nd highest property tax rate of all counties in Maryland, which i find interesting considering Montgomery County has better schools.

I've never heard of a local income tax until Maryland. I've lived in Virginia, California, Illinois, Indiana, etc.

Has there always been a "county" income tax? Has anyone in Maryland politics every suggested getting rid of it? Just trying to get educated on Maryland tax rules and what led to their current existence.

Because it's Maryland...

 

[PrchJrkr]

We have to pay for all the illegitimate chil'rens upbringing, so they can become productive members of the prison population when they grow up. :shrug:

 

[Booboo3604]

Is the general "state" income tax not going back to the counties? We already pay property taxes which are supposed to fund the county's services. Of which, Charles County has the 2nd highest property tax rate of all counties in Maryland, which i find interesting considering Montgomery County has better schools.

You have to look at it big picture. While Charles County has a higher income tax rate, the amount of money collected from property taxes on more expensive property and from the lower percentage on a higher average income is more than what Charles County collects. I personally had never heard of a yearly county "car" tax on vehicles either until my BF received his first bill after his truck was registed in VA ($4.57 per $100 of assessed value). To me that was insane also.

 

[NIU_Huskies]

The Counties charge an income tax because they do. That's one of the reasons Maryland is considered a high tax state (and the County IT is ignored, either because of ignorance of it or trying to be deceptive when some of the cheerleaders get going).

Yes, whenever i see articles comparing income tax from state-to-state they all appear to neglect mentioning that ALL Maryland counties charge an additional income tax rate and only mention 2-5.75% as the income tax rate. So Maryland should probably rank much higher than they are portrayed.

As to why, it's an income stream. Other states do have a local income tax, PA is one, although the rates are all over the map and tied into gambling money somehow.

Never knew that about Pennsylvania but a local income tax rate appears to be uncommon amongst the entire U.S.

Part of the reason for high property tax rates almost anywhere is an imbalance between commercial and residential growth. In the case of Charles (and Calvert for that matter) residential growth and population far outstripped commercial growth with many of the new residents keeping their jobs in DC and its environs. I don't know the Charles number, but I'll bet it's similar or higher, but over 60% of Calvert residents commute outside the County for work. There are few home grown industries in much of Southern Maryland.

This makes sense, although Charles County seems to be building a ton of new housing so that should ideally increase their tax income base. Agreed on the commercial growth, i haven't explored most of Charles County but Waldorf appears to have too many "retail" businesses that offer minimum wage type jobs and a lack of actual corporations or large companies that pay higher wages. Which helps explain why so many people commute to DC and NoVA since that's where all the good jobs are.

Does anyone know what Charles County has done to improve this (offer tax incentives to lure large business, etc.) or do most corporations not want to be based so far away from the Washington metro area?

 

[Jeant]

NY charges county tax, PA charges school income tax through the employer. In the long run, 8% really isn't outrageous. Having lived in several states myself, MD (St. Mary's Co), IL (Grundy Co) and currently Nebraska (Douglas Co) when you look at the tax structures a a whole, they are all pretty close. My home in MD property tax was 3600, same value here in Nebraska 10,000. Income taxes there 6.84 %, here 8%.

 

[NIU_Huskies]

You have to look at it big picture. While Charles County has a higher income tax rate, the amount of money collected from property taxes on more expensive property and from the lower percentage on a higher average income is more than what Charles County collects. I personally had never heard of a yearly county "car" tax on vehicles either until my BF received his first bill after his truck was registed in VA ($4.57 per $100 of assessed value). To me that was insane also.

I understand your first point, but i wouldn't consider the average home price (single-family and townhomes) of $225-250k in Charles County to be cheap or accessible for any family bringing home a gross income of less than $75,000. Those are rather high-priced homes compared to most of the U.S.

I agree with your 2nd point. A personal property tax every year on a vehicle is excessive. You already have to pay for yearly registration and yearly vehicle inspections. However, even when you factor that in, it doesn't make up for the income tax discrepancy between MD and VA. A VA resident who owns a vehicle still pays less in taxes than a MD resident who owns a vehicle.

 

[NIU_Huskies]

NY charges county tax, PA charges school income tax through the employer. In the long run, 8% really isn't outrageous. Having lived in several states myself, MD (St. Mary's Co), IL (Grundy Co) and currently Nebraska (Douglas Co) when you look at the tax structures a a whole, they are all pretty close. My home in MD property tax was 3600, same value here in Nebraska 10,000. Income taxes there 6.84 %, here 8%.

Where did you live in Illinois?

Illinois only has a base income tax rate of 3.75% for all tax payers. Significantly less than nearly 8%.

 

[Gilligan]

Maryland is known for being a "high tax" state, of course, but other states obtain their annual revenue through higher sales taxes and/or personal property taxes. MD only charges businesses the "personal" property tax, and not individuals. So you have to look at the total tax picture.

The high(er) taxes and the high(er) cost of living in MD are some of the reasons why businesses stay away or leave and why many peopleleave the state when they retire. I know that I'm leaving.

 

[Freefaller]

As a one-year old resident of Maryland, can someone explain to me why Maryland has a "state" income tax rate and then each county in Maryland gets to charge its own income tax rate (Charles County is 3.03%)?

I assume most Maryland citizens fall in the 4.75% state income tax bracket ($3,000 - $100,000), since it appears to be the catch-all bracket. So if you live in Charles County you are paying 7.78% in income taxes. That's absurd!

Is the general "state" income tax not going back to the counties? We already pay property taxes which are supposed to fund the county's services. Of which, Charles County has the 2nd highest property tax rate of all counties in Maryland, which i find interesting considering Montgomery County has better schools.

I've never heard of a local income tax until Maryland. I've lived in Virginia, California, Illinois, Indiana, etc.

Has there always been a "county" income tax? Has anyone in Maryland politics every suggested getting rid of it? Just trying to get educated on Maryland tax rules and what led to their current existence.

I am quite impressed that as a one year old, you can read, write and use a computer! (Just having a little fun, no offense intended!)

 

[RJO]

Welcome to Maryland. What's in your wallet?

 

[Booboo3604]

I understand your first point, but i wouldn't consider the average home price (single-family and townhomes) of $225-250k in Charles County to be cheap or accessible for any family bringing home a gross income of less than $75,000. Those are rather high-priced homes compared to most of the U.S.

I agree with your 2nd point. A personal property tax every year on a vehicle is excessive. You already have to pay for yearly registration and yearly vehicle inspections. However, even when you factor that in, it doesn't make up for the income tax discrepancy between MD and VA. A VA resident who owns a vehicle still pays less in taxes than a MD resident who owns a vehicle.

I just looked and Charles County is actually #9 in highest income tax, behind even Montgomery County (http://taxes.marylandtaxes.com/Indi...on/Tax_Rates/Local_and_County_Tax_Rates.shtml).

So with the higher % off a higher average income and the the property tax off an average home price of $370k, and another major factor you can't ignore, the population of Mont. Co. being almost 6 times that of Charles County there is no surprise as to why our smaller counties aren't competing.

Virginia has an income tax of 5.75% for anything over 17k, higher than MD.

I guess my point is, like someone else posted, in this area, everything really comes out a wash when you factor in percentages and what may or may not be taxed.

 

[NorthBeachPerso]

This makes sense, although Charles County seems to be building a ton of new housing so that should ideally increase their tax income base. Agreed on the commercial growth, i haven't explored most of Charles County but Waldorf appears to have too many "retail" businesses that offer minimum wage type jobs and a lack of actual corporations or large companies that pay higher wages. Which helps explain why so many people commute to DC and NoVA since that's where all the good jobs are.

Does anyone know what Charles County has done to improve this (offer tax incentives to lure large business, etc.) or do most corporations not want to be based so far away from the Washington metro area?

Actually all that residential growth is a negative. The cost of County services (schools, law enforcement, general government) far outstrips any additional property or income tax revenues. Usually by a factor of 3 or 4 to 1. This number is several years old and it's for Calvert but, again, Charles won't be far off, but the folks over here figured out that every additional house brought in around $4000 in property tax revenue but cost $14000 or so in County services. Net loss per new house $10000. That's why we jumped at the Dominion expansion and even it got some tax exemptions and phase-ins but will start bringing in an additional $20M/year starting next year.

Yes, Charles County has offered incentives but the reality is that the "industry" in much of Maryland is government and its throw offs, not making widgets.

 

[NIU_Huskies]

I just looked and Charles County is actually #9 in highest income tax, behind even Montgomery County (http://taxes.marylandtaxes.com/Indi...on/Tax_Rates/Local_and_County_Tax_Rates.shtml).

Yup, lower income tax rate than Montgomery county but higher property tax rate.

If person A lives in Charles County makes $75,000 income with a $300,000 house they pay $5,783 in income taxes (7.78% tax rate) and $3,615 in property taxes ($1.205 per $100). If person A lived in Montgomery County they pay $5,910 in income taxes (7.95% tax rate) and $2,169 in property taxes ($0.723 per $100). Charles County resident is paying $9,398 in property and income taxes, that same person in Montgomery County is paying $8,079. Difference of $1,319.

So with the higher % off a higher average income and the the property tax off an average home price of $370k, and another major factor you can't ignore, the population of Mont. Co. being almost 6 times that of Charles County there is no surprise as to why our smaller counties aren't competing.

True, Montgomery County has many more residents but then doesn't that also mean they require many more $$ for services to tend to those residents?

Virginia has an income tax of 5.75% for anything over 17k, higher than MD.

I guess my point is, like someone else posted, in this area, everything really comes out a wash when you factor in percentages and what may or may not be taxed.

Use Person A again in Charles County who makes $75,000. He pays $5,783 in income taxes (7.78% tax rate). Person A lives in Virginia and pays $4,055 in income taxes. A $1,728 difference, that's pretty significant.


**Caveat - Someone check my numbers i could have messed up somewhere but they should be good**

 

[Booboo3604]

Yup, lower income tax rate than Montgomery county but higher property tax rate.

I may be wrong, but please look at this... the total property tax in MoCo is not as low as you think. Please see the second to last column on the left. You have calculated your numbers using just the general tax, not the full property tax billed.

http://www.montgomerycountymd.gov/Finance/Resources/Files/15 Property Tax Rates_00rpF.pdf

 

[NIU_Huskies]

I may be wrong, but please look at this... the total property tax in MoCo is not as low as you think. Please see the second to last colum on the left. You have calculated your numbers using just the general tax, not the full property tax billed.

http://www.montgomerycountymd.gov/Finance/Resources/Files/15 Property Tax Rates_00rpF.pdf

Nice find, i was just going by the baseline that Maryland lists on its county tax site.

http://dat.maryland.gov/realproperty/Pages/2015-2016-County-Tax-Rates.aspx.

If you include the state property rate of $0.112 for all counties, then Charles County property taxes are actually higher than my "Person A" scenario above. They are then $1.317 per $100, which comes out to $3,951 in total property taxes, rather than $3,615. The only municipal districts in Montgomery County, according to the document you linked, that appear to top that is Friendship Heights with a rate of $1.634 per $100 and Garrett Park with a rate of $1.3182 per $100. The rest of the districts appear to still be lower than Charles County.

 

[dave1959]

As a one-year old resident of Maryland, can someone explain to me why Maryland has a "state" income tax rate and then each county in Maryland gets to charge its own income tax rate (Charles County is 3.03%)?

I assume most Maryland citizens fall in the 4.75% state income tax bracket ($3,000 - $100,000), since it appears to be the catch-all bracket. So if you live in Charles County you are paying 7.78% in income taxes. That's absurd!

Is the general "state" income tax not going back to the counties? We already pay property taxes which are supposed to fund the county's services. Of which, Charles County has the 2nd highest property tax rate of all counties in Maryland, which i find interesting considering Montgomery County has better schools.

I've never heard of a local income tax until Maryland. I've lived in Virginia, California, Illinois, Indiana, etc.

Has there always been a "county" income tax? Has anyone in Maryland politics every suggested getting rid of it? Just trying to get educated on Maryland tax rules and what led to their current existence.

why would a "one year old" need to know anything about taxes.?

 

[NIU_Huskies]

I am quite impressed that as a one year old, you can read, write and use a computer! (Just having a little fun, no offense intended!)

I see what you did there!

How about "After my first year as a resident of Maryland..."?

 

[NIU_Huskies]

Looks like residents of La Plata and Indian Head get to pay an additional tax rate above the rest of Charles County as well. Although, La Plata appears to have very good schools so maybe its worth it???

https://www.charlescountymd.gov/sit...ners/resolutions/2015-07 Budget Ordinance.pdf

Also, if i'm understanding the file below correctly. Any new dwellings (single-family, townhomes) built after July 2003 in Charles County have to pay an additional excise tax on their property for 10 years, which adds another $1,210 to a single-family home's yearly property taxes.

https://www.charlescountymd.gov/sites/default/files/pgm/excise_tax.pdf

This sounds to me like the older residents of Charles County pushed the tax bill to all the new residents even though their kids would get to enjoy the impact that that additional tax revenue would provide to the school system.

Boy do all the extra taxes for Charles County keep adding up to more than the baseline that already makes them the 2nd highest county in Maryland.