Maryland Attorney General Doug Gansler is weighing an appeal of a decision by the state's highest court that would cost the state's counties and Baltimore City $128 million in taxes.
Maryland's Court of Appeals ruled in January that the state must offer credits to taxpayers whose out-of-state income is subject to local piggyback taxes, and it rejected Gansler's request to reconsider the ruling on May 17. Gansler has 90 days to decide whether to appeal to the U.S. Supreme Court.
Montgomery County would be hit hardest if the court's decision stands, due to the county's high concentration of wealth. Of the $128 million in piggyback taxes collected over the past three tax years, Montgomery County would have to return $72.5 million to taxpayers. The ruling would affect about 56,000 taxpayers statewide.
"The decision hasn't been made yet. We're considering all the options for that," said Gansler spokesman David Paulson. Gansler's office in its court request wrote that "it is virtually certain that the state will seek Supreme Court review of the court's decision."
The 2006 lawsuit was brought by Brian and Karen Wynne, of Howard County, who argued that they were being double-taxed by the county on stock they owned in a national health care provider.
Gansler's office argues in court documents that such double taxation is a feature of interstate commerce under the U.S. federal system. It says the Court of Appeals overreached in requiring the state to offer a credit to offset the piggyback tax.
The piggyback tax is a county income tax that ranges between 1.25 percent and 3.20 percent of the state income tax. It's unique to Maryland, and out-of-state employers don't typically withhold it.
"Ultimately, it would be a pretty big fiscal hit for our counties," said Andrea Mansfield, legislative director for the Maryland Association of Counties.
The Court of Appeals has granted a stay on its decision, meaning counties and Baltimore would not have to start refunding the piggyback tax until the Supreme Court makes a decision. Marylanders would have to file an appeal to request a refund. State law allows them to file appeals going back up to three years.