MarylandReporter.com spoke with Comptroller Peter Franchot on Wednesday afternoon following a Board of Public Works meeting in which Franchot announced that his office has provided a three month forbearance period for business tax returns and payments and a two month forbearance period for employer withholding tax returns and payments.
Additionally, Franchot said both self-employed individuals and independent contractors will also be granted a three month forbearance period for quarterly estimated income tax returns and payments. This means that business tax returns and payments that would normally be due from Jan-March will now be due on April 15, as will employer withholding tax returns and payments for the same period.
The forbearances are both interest and penalty-free and are expected to help individuals and small businesses collectively save more than $1 billion at a time when coronavirus cases are on the rise both in Maryland and throughout the nation. Franchot, a Democrat, is a candidate for governor in 2022.
MarylandReporter.com: What do the 90-day business tax holiday and 60-day withholding holiday mean for Marylanders during this time?
Franchot:This means that $1.5 billion in cash that is in Marylanders’ pockets remains there rather than being sent to me, the tax collector. Ultimately, the billion-and-a-half has to be delivered to us because we have to collect the taxes. But since we are deferring it for 90 days and 60 days on the income withholding-that is a huge help to many Marylanders and many small businesses because its not money they have to apply to a grant for…this is the state government saying: ‘Keep your own money in your own pocket because we are going to get through the pandemic but it is going to take several months or longer…’ Most of all it is a cry for Maryland to recognize that there is a lot of suffering going on, particularly among low-wage earners and small businesses.
MarylandReporter.com: During today’s BPW meeting you mentioned that you will ask the federal government to consider tax forbearances similar to what you proposed. But would you also urge Maryland’s local governments to also consider such measures, namely with property taxes?
Franchot:We are going to put that out in the letter to Montgomery County, Prince George’s County, and other counties and jurisdictions. That is exactly what they should be doing, within parameters. Because neither the counties nor the state is like the federal government. We can’t just print money down in the basement. On the other hand, we have shown that tax deferments do not reduce the actual tax revenues. Most people are very responsible…As soon as you focus on the fact that it’s not an attack on the tax revenues… it’s not like reducing your budget at the county levels. It’s simply saying: ‘Give them a 90-day tax-free loan.’ The assumption is that people will abuse it and they won’t pay. But that is not true. That has been proven wrong. We have the data that shows that when we went from April 15 to July 15 (filing deadline extension) on all taxes last year we stayed very stable as far as the absolute resolution of tax obligations. So why not do it again?…It should be emulated at the local level. It should be considered by the IRS at the national level.
MarylandReporter.com: Are all of Maryland’s businesses eligible for tax forbearance or is there specific criteria?
Franchot:Yes. But not all of them take advantage of it. Some of them are big businesses and they had this already baked into their systems. So they do their income withholding and they send us some money on a monthly basis even though we say to them: ‘You don’t have to.’ But it’s selective in a good way because the small businesses really do benefit. They realize that this is a significant chunk of money for them…We find that the larger businesses say: ‘Thank you very much’ and then go ahead and pay their taxes.
MarylandReporter.com: You have often said that Maryland cannot wait for Congress to provide states with relief money. Following that trajectory, is the $900 billion relief package that was recently signed into law adequate?
Franchot:No. Because the $2,000 (proposal) received a lot of attention but it got whittled down to $600. That is not adequate..there needs to be a $2,000 federal payment…I’m suggesting that for our lower-wage workers who are particularly affected by the pandemic that we (Maryland) do our own version of a stimulus…It won’t have any affect on the state’s budget. It won’t have any effect on the state’s taxes. It won’t have any effect on almost anything. It’s just that we are a rich state and we have these reserves that are not doing anything right now and are gathering dust.
MarylandReporter.com: What is the state’s fiscal outlook for the year?
Franchot: There are two scenarios. One is that the recovery really takes off like a rocket. Kind of like the roaring 20s because so many people making money have not been able to spend it on travel or eating out. And that the vaccine will be distributed so that everybody feels safe. The other scenario is that this thing (the pandemic) goes on through the calendar year and we don’t have a resolved situation with the virus. And that is a little troubling as far as tax revenues.