Maryland appeals income tax case to Supreme Court

Tax Law

The Daily Record reports the justices on Monday asked for the Obama administration's views on the constitutionality of barring state residents from deducting income taxes paid to other states from their local city or county taxes owed in Maryland.

Last year, the Maryland Court of Appeals found the state law unconstitutional, saying it violates the Commerce Clause. The court said the law discourages Maryland residents from earning money outside the state.

Maryland law allows residents to deduct income taxes paid to other states from their Maryland state tax. But the state says that provision does not apply to the "piggyback tax" the state collects for local governments.

In a brief to the Supreme Court, Maryland Attorney General Douglas Gansler said the state has broad authority to "tax all income of its residents, even income earned outside the taxing jurisdiction." He noted that the Court of Appeals' decision could cost local governments $45 million to $50 million annually. If the law is found unconstitutional, Maryland also might have to refund up to $120 million in taxes, Gansler noted in his petition.

The case arose after Brian and Karen Wynne challenged their Howard County tax bill. They had been blocked from deducting $84,550 from their county tax bill that they had paid in income taxes to other states. Brian Wynne's out-of-state income resulted from his ownership stake in a company that operates nationwide.

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