Maryland Officials Expect $250M Loss In Sales Tax Revenue

MARYLAND — Officials anticipate a potential shortfall of approximately $2.8 billion for the final quarter of fiscal year 2020, which ends June 30, due to the new coronavirus pandemic. State Comptroller Peter Franchot and Bureau of Revenue Estimates Director Andrew Schaufele Friday said the economic impact to the state’s business community and working families represents a loss of nearly 15 percent to the state’s annual general fund.

“Before we discuss the economic impact, I must salute the steady leadership of Gov. Hogan and his focus on ensuring that Maryland has the resources and support it needs to save lives and stop the spread of this deadly virus. As Maryland's chief fiscal officer, I have -- for the entire duration of my tenure as comptroller -- repeatedly sounded the alarms on the need for our state to put away as much money possible to help us weather fiscal and economic storms that may come our way. The storm has finally arrived, and it is stronger and more devastating than we’ve ever seen before. Thousands of businesses have had to close their doors and hundreds of thousands of Marylanders now find themselves without a job," said Franchot in a news conference.

The loss of jobs has been "unprecedented," he noted.

"In just three weeks, 240,000 Marylanders have filed unemployment claims. That's a staggering figure, yet it doesn't begin to take into account the impact on families who depend on those salaries to put food on the table and to provide shelter, heat and electricity. They are left to make difficult choices of which bills to pay as they await unemployment funds and stimulus checks," said Franchot.

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Officials compared unemployment levels both in Maryland and nationally that will "far exceed those of the Great Recession more than a decade ago."

"Just yesterday, our labor department announced that another 108,508 people filed new unemployment claims in Maryland last week. To put this in perspective, the labor department reported just 2,090 filings for the week that ended on March 6. Meaning that in just under a month, our state’s new unemployment filings have increased by nearly 5,200 percent," said Franchot.

Schaufele said that a reduction of 22 percent of withholding "is a decline never seen before in the history of our state and it’s not just the magnitude of this crisis, it’s also the timing."

"Never before have we seen such a torrent of negative economic news hit with only three months left in the fiscal year. The average monthly withholding impact could be a loss of $185 million. What we have presented today represents, hopefully the worst case scenario and is based on the possibility that we will be under strict stay-at-home orders until the end of June. If there is a positive note, the private sector is still able to maintain 78 percent of wages – a testament to the strengths of our labor force and Maryland’s close ties to the federal workforce," said Schaufele.

Industries throughout the state have been impacted, some immediately and directly. Hotels and eateries, for example, account for almost eight percent of W2s and two percent of withholding taxes. The State of Maryland should expect to lose 90 percent of that after one full month of staying at home. Approximately 458,000 Marylanders work in the hospitality industry.

Schaufele noted that a loss in sales tax will have a dire impact.

“We find that we would lose, on average, 59 percent of all sales tax in a full month – or almost $250 million. It is worth noting that some share of the sales tax will be recaptured at a later date as pent-up demand for products is realized. There is uncertainty regarding whether or not the absolute magnitude of online ordering has increased – we think it has – however, much of that revenue is not designated for the general fund. It is deposited into the Blueprint Fund for Education," said Schaufele.

See more:

Maryland Coronavirus: Tax Payment Deadline Extended

Coronavirus Leads To MD Business Tax Filing Deadline Extension