THE GAZETTE
Wednesday, May 20, 2015 r
Page A-11
Supreme Court rules against Maryland InBrief n
County to lose millions in income-tax revenue
BY
KATE S. ALEXANDER STAFF WRITER
States cannot double-tax income earned out of state, the U.S. Supreme Court ruled Monday — a decision that will cost Montgomery County millions. The court was considering whether states should provide taxpayers a full credit for taxes paid to other states on income earned in those states. The case was filed by Howard County residents Brian and Karen Wynne. The Wynnes filed the case after they tried to claim an income tax credit for income paid to other states on their 2006 tax filing. The credit was denied, in part. The state allowed a credit against their Maryland state income tax, but not against their county income tax. On Monday, the Supreme Court struck down the tax system in a splintered 5-4 decision. In the majority opinion, the court referred to the tax as a double-taxing “scheme” and held that it violates the negative or dormant Commerce Clause of the U.S. Constitution. The negative clause “precludes states from discriminating between transactions on the basis of some interstate element,” says a majority opinion by Justice Samuel A. Alito Jr. “Maryland’s income tax scheme discriminates against interstate commerce,” the opinion says. Alito was joined in the opinion by Chief Justice John G. Roberts Jr. and justices Anthony M. Kennedy, Stephen G. Breyer and Sonia Sotomayor. Justices Antonin Scalia, Clarence Thomas, Ruth Bader Ginsburg and Elena Kagan dissented. The decision will affect Montgomery County over many fiscal years, starting as soon as fiscal 2016, Council President George L. Leventhal said Monday morning. Montgomery’s budget will take a hit of between $8 million and $10 million in the coming fiscal year, which starts July 1. In fiscal years 2017 and 2018, the blow will be much bigger — as much as $55 million each of those two years, said Leventhal (D-At Large) of Takoma Park.
“It’s a devastating decision. I can’t overstate the significance to us in terms of our finances and plans going forward. It is not welcome news at all.” Isiah Leggett, county executive The fallout will come when the state withholds additional tax payments to Montgomery County, said County Executive Isiah Leggett. Currently, the state does not grant credits against county income taxes for income earned out of state. “They will deduct based on our people that filed and the time frame they filed in terms of the income tax,” he said. Starting in fiscal 2019, the county expects to see income-tax revenue decrease about $25 million each year as a direct result of the decision, Leventhal said. “This requires us to be cautious,” he said. “We need to live within available resources.” While $10 million is a small percentage of next year’s $5.07 billion budget, Leggett (D) said, it’s significant. “It’s a devastating decision,” Leggett said. “I can’t overstate the significance to us in terms of our finances and plans going forward. It is not welcome news at all.” Even without the Wynne decision, Leggett has warned that the county likely would need to raise property taxes next year for the fiscal 2017 budget. “This just adds to it,” he said. In the majority opinion, the justices said Maryland taxes the income that residents earn both in and out of state, as well as income that nonresidents earn from sources within Maryland. “But unlike most other States, Maryland does not offer its residents a full credit against the income taxes that they pay to other States,” the justices said. “The effect of this scheme is that some of the income earned by Maryland residents outside the State is taxed twice.” The Supreme Court previously has ruled that states cannot subject corporate income to tax systems like Maryland’s doubletax “and we see no reason why
income earned by individuals should be treated less favorably,” Alito wrote. Justices in the minority disputed the use of a doctrine known as the negative or dormant Commerce Clause. In his dissenting opinion — which Thomas partly joined — Scalia wrote that the U.S. Constitution does not contain a negative or dormant Commerce Clause. It only has the Commerce Clause, which empowers Congress to regulate the commerce with foreign nations, among states and with Native American tribes. “The Clause says nothing about prohibiting state laws that burden commerce,” Scalia said. The so-called negative Commerce Clause is doctrine, and not part of the Constitution, he argued. Scalia also wrote that Maryland’s tax has disadvantages, but it also lets the state collect equal revenue from taxpayers with equal incomes, to avoid the burden of verifying tax payments to other states, and it ensures that every resident pays at least some income tax.
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“Nothing in the Constitution precludes Maryland from deciding that the benefits of its tax scheme are worth the costs,” he said. Thomas wrote a separate dissenting opinion, which Scalia partly joined. Thomas also disagreed on the use of the so-called negative Commerce Clause, arguing that it has no base in the Constitution, makes little sense and has proved it doesn’t work when applied and cannot serve as a basis for striking down a state statute. Thomas wrote that the majority opinion would have surprised “those who penned and ratified the Constitution.” In a third dissenting opinion, Ginsburg wrote that the decision veers from a principle the Supreme Court has repeatedly acknowledged: that “a Nation or State may ‘tax all the income of its residents, even income earned outside the taxing jurisdiction.’” Ginsburg was joined by Scalia and Kagan in her minority opinion. “As I see it, nothing in the Constitution or in prior decisions of this Court dictates that one of two States, the domiciliary State or the source State, must recede simply because both have lawful tax regimes reaching the same income,” Ginsburg argued. She continued: “A taxpayer living in one State and working in another gains protection and benefits from both — and so can be called upon to share in the costs of both States’ governments.” kalexander@gazette.net
Alex’s Run is June 14
The fifth annual Alex’s Run will be held June 14. The race is held in memory of Alex Popeck, a Sherwood High School scholar-athlete who died in 2011 of injuries suffered in a car crash. The 5K course is designed for runners of all abilities, plus walkers. Registration will begin at 7 a.m. at the Olney Boys and
Girls Community Park, 4501 Olney-Laytonsville Road. Proceeds benefit the Alex Popeck Never Back Down Foundation, established to help teens recognize that an individual can make a difference in their community. The foundation has awarded more than $40,000 to seniors whose applications best embody the qualities of caring, compassion, humility, honesty and a “Never Back Down” attitude, according to organizers. Registration and other information is at apnbd.org.
Memorial Day closings Montgomery County and its municipalities will observe the following holiday schedules for Memorial Day on Monday.
• Parking at public garages, lots, curbside meters: free. • State offices and courts: closed.
Montgomery County
Rockville
• County offices, libraries, schools: closed. • County liquor stores: open 10 a.m. to 6 p.m. • Recreation: All indoor and outdoor aquatic facilities will be open; administrative offices, senior centers and community recreation centers will be closed. • Montgomery Parks: All Parks facilities will be open. Operating schedules are at MontgomeryParks.org. • Ride On buses, Metrobus, Metrorail: Sunday schedule. • TRiPS Commuter Stores in Silver Spring and Friendship Heights: closed. • Trash and recycling pickup: no collection Monday; pickups one day later through week until Saturday. • Transfer station: closed.
• City Hall: closed. •Trash and recycling pickup: no collection Monday; pickups one day later through week until Saturday. • F. Scott Fitzgerald Theatre and box office, Croydon Creek Nature Center, Glenview Mansion and Art Gallery, Lincoln Park, Thomas Farm and Twinbrook community centers, Senior Center: closed. • Rockville Swim and Fitness Center: Indoor pool and fitness center will be open 11 a.m. to 9 p.m. The North Pool will be open 11 a.m. to 9 p.m. The outdoor recreation and fitness pools will be open noon to 9 p.m. The South Indoor Pool will be closed. • Parking at city meters: free.