1947 Retail Sales Tax Law

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Governor William Preston Lane, Jr. asked the General Assembly of Maryland to institute a retail sales tax during an uncertain period in Maryland's history.  World War II had ended only two years before.  As G.I.'s began to return home, Americans feared large-scale unemployment, high consumer demand especially for housing, and a recession as military factory workers lost their jobs.  Additionallly inflation, communism, atomic warfare, and labor strikes plagued the country.  Like the rest of the country Marylanders were concerned.

At the close of fiscal year 1945, Comptroller J. Millard Tawes concluded in his Annual Report, "The events of the past five years have so upset the economic and financial situation that the problem of forecasting the future becomes more difficult than ever. It will be necessary to watch the situation closely as we pass through the current fiscal year."  He hoped that Maryland's ambitious Post War Construction Program, a program to build highways, buildings and other necessary infrastructure, would aid the state's transition to peacetime as well as provide services and repairs the state had lacked during the war.  Tawes included an itemized statement of the Post War Construction Program projects, their estimated costs and the amount of money available for each in his 1946 report.  Projects included constructing and renovating mental disease hospitals, penal institutions, schools and state departmentes.  However, the state did not have enough money to finish the year let alone to fund these projects.  Governor Herbert O'Conor anticipated completing 539 post-war public service projects at a cost of $61,000,000 when he addressed the 1945 Maryland General Assembly.  But in his 1947 Address O'Conor explained that the cost of administration, education and salaries was greater than had been anticipated.  The General Assembly would have to find more funds or cut government programs.  Comptroller Tawes projected that unless the state found new sources of revenue to provide another $3,000,000, funds would be exhausted mid-year.  Additonally the Sherbow Commission, a commission appointed by Governor O'Conor to consider the distribution of tax revenues, suggested that more of the state's income tax revenues be distributed to Baltimore City and the counties to provide more financial aid for poorer counties.  This proposal would leave even less revenue for State projects.

Election

GET ELECTION INFORMATION FOR GOVERNOR AND ESPECIALLY LACY.  WHAT DID THEY PROMISE?  WHO SUPPORTED THEM?  ETC.

House Bill 545: The Retail Sales Tax Law

Governor William Preston Lane, Jr. became governor of Maryland on January 3, 1947 when O'Conor assumed his place as a United States Senator [CHECK THIS DATE!]  A new comptroller, James J. Lacy, also began his term [WHEN?  ELECTED?  WHAT ROLE DID HE HAVE IN PLANNING AND PROMOTING THE NEW TAX?]  Together they led the state in imposing and enforcing the first retail sales tax in Maryland.  Governor Lane recognized Maryland's financial problems but he also desired to continue to expand government programs.  "The State needs additional housing facilities," Lane explained in his first address to the General Assembly, "it needs new and more school and hospital buildings, it needs new and better roads, and it needs many, many other things, the production of which was stopped by the war (Jan. 8, 1947, House Journal, 98).  He also prioritized highway construction and a bridge across the Chesapeake Bay.  But in addition to these improvements the state also needed more revenue.

The Board of Revenue Estimates, comprised of the State Treasurer, the Budget Director and Comptroller Lacy (chair), aided the Governor in devising a budget for fiscal years 1948 and 1949.  As the General Assembly began to consider the governor's budget, Lane explained that they had received "the largest requests for appropriations...in the history of the State" (Budget Message, Feb. 6, 1947, House Journal, 987).  Without enough financial resources to meet the requests, the General Assembly had three choices, Lane suggested, to have an unbalanced budget, decrease the appropriations requested, or increase the state's revenue.  Lane proposed the third option which would require $39,164,442.73 (Budget Message, House Journal, 988-990).   He abandoned the lofty ambitions of the Post War Construction Program and focused his efforts on emergency construction for mental hospitals, penal institutions, colleges and roads, yet his budget was still  _____ more than the previous years' budgets.  Comptroller Lacy explains in his 1947 Annual Report that the State needed new sources of revenue to fund increasing appropriations and to supplement funds the treasury lost to cities, counties and incorporated towns after the State instituted the Sherbow Report suggestions.  Following his budget proposal, Governor Lane asked the Board of Revenue Estimates, (chaired by the Comptroller), to consider how to solve this problem and raise state revenues.  The Board recommented either a 2% sales tax or an income tax increase.  Lane supported the 2% retail sales tax.

On February 19, 1947, thirteen days after he presented the budget, the Governor again addressed the House of Delegates and proposed the 2% sales tax, this time in a letter delivered by the Secretary of State.  "I realize that objections will be raised to this method of taxation," he explained, "particularly by persons or groups with special interests to protect.  In considering the problem, however, I urge you to study the need of additional State revenues from the overall point of view.  It will be your task to balance the additional revenues which the State must have to finance and adequate road program, an adequate school program and to put into effect the recommendations of the Maryland Commissionn on the Distribution of Tax Revenues against all arguments which will be made against the sales tax.  After careful and deliberate study the Board of Revenue Estimates and the Advisory Committee have concluded that the only adequate source of revenue which is available to meet these requirements is the sales tax.  I concur in these conclusions" (emphasis mine, Message from the Executive Department, Feb. 19, 1947, House Journals, 1239).

[NEED INFO ON WHO SPONSORED THE BILL.  ALSO NOTE THAT MARCH 6, THREE DAYS AFTER TAX BILL INTRO'D THE GOVERNOR SENDS MESSAGE PROMOTING MODERN HIGHWAY SYSTEM AND BAY BRIDGE...]

On March 3, 1947, the Speaker of the House of Delegates ____, and Delegates Luber, Preston, John E. Clark, Stromeyer, Brinsfield, Ramsburg and McIntire sponsored House Bill 545 to add 49 sections to Article 81 of the Annotated Code of Maryland and thereby instituted a sales tax in Maryland.  Two weeks later, Mr. McIntire removed his name from the bill as a co-sponsor [WHY?]  The bill returned to the House on March 21 with a favorable report from the Committee on Judiciary.  However, the report was rejected with 66 nays and 53 yeas.  Mr. McIntire was among those who voted against it [WHY?]  The following day Mr. Stromeyer motioned to reconsider the rejected favorable report for Bill 545 and 72 delegates voted to reconsider while 49 voted against.  So Bill 545 had a third reading and passed, 73 to 47 on March 24, 1947.  Mr. McIntire voted for it [WHY?]  The Bill went to the Senate.

[WHAT HAPPENS IN THE SENATE?]

Opposition to the Retail Sales Tax

Many people were opposed to this new tax.  On March 19, 1947 members of the minority party [REPUBLICAN?] submitted a House Resolution "That the proposed two percent consumer's sales tax program be abandoned by the General Assembly of Maryland and that an alternative tax program be enacted" including an increase in corporation income taxes, individual income taxes, and beer and amusement tax, and the imposition of cigarette, tobacco and non-alcoholic beverage taxes (House Resolution - By Members of the Minority Party, House Journal, 1947).  They opposed the retail sales tax because it was "inequitable and discriminatory...especially to citizens of low income...is both unjust, obnoxious, and unwise because of the size and geographical position of our State...[and it] would be uneconomical because of the cost of collection of said consumer's sales tax."  (House Resolution - By Members of the Minority Party, House Journal, 1947, 2242).

While legislators argued against the tax, "The citizens of the State of Maryland, from all walks of life have emphatically raised their voices in protest against this inequitable, unjust, obnoxious and unwise discriminatory method of taxation..." (House Resolution - By Members of the Minority Party, House Journal, 1947, 2242).  17, 540 citizens from Baltimore City, 4200 from Prince George's County, and 2,000 from Charles County petitioned the legislators and governor to repeal the Sales Tax and replace it with alternate forms of taxation (House and Senate Journals -- Extraordinary Session, 1947, House Journal, 17).  [NEWSPAPER ACCOUNTS, EDITORIALS, ANYTHING!!!]

Enforcement -- The Comptroller's Office

Despite the opposition, once the law was passed the Comptroller was responsibile for collecting and enforcing the tax.  The law went into effect on July 1, 1947.  Lacy organized a separate division of the Comptroller's Office, the Retail Sales Tax Division, to handle the tax.  He recruited and hired new workers and wrote the rules and regulations for the tax.  Meanwhile the new staff met with representatives of all major businesses and industries to discover potential problems the new law would create.  "These conferences continued for several months and their ultimate value has been proved by the results obtained," Lacy explained in his 1948 Annual Report.  "No Rule or Regulation has been successfully attacked and upset by Court proceedings and very little litigation has resulted from the Sales and Use Tax Laws" (11).  They also worked on an extensive eduational campaign including radio broadcasts and commercials, articles in the press, and meetings in Maryland and Washington D.C.  [SEE IF CAN FIND PRESS STUFF]  During the first three months the law was in effect, 35 investigators met with people to explain the law.  The enforcement campaign was also successful according to Lacy's report, and his office collected $160,656 that would not have been collected.  Most of this revenue was taxes not collected at the time of sale rather than merchants keeping tax money for themselves.  However, Lacy did prosecute several criminal cases [SEE IF CAN FIND THESE CASES] resulting in some prison sentences.

In 1947 Lacy observed, "The experience to date both from the standpoint of administering the law and the revenue received has been satisfactory. I believe we have been able to work out the problems encountered with a minimum of annoyance and inconvenience to the various individuals and others engaged in business, and the returns from the tax thus far have indicated that the estimates of revenue from the tax made at the time the legislation was pending in the Legislature were conservative and will undoubtedly exceed the estimates to an appreciable extent" (1947 Annual Report, 12).  [USE THIS IN CONCLUSION ABOUT WHETHER IT WAS DIFFICULT OR EASY TO ENFORCE IN THE LONG RUN...]