A bill that would allow counties on the Eastern Shore to hike their hotel tax rates by 1% faces an uncertain future after a debate in the Maryland Senate on Wednesday.
The bill would have amounted to a nearly $5 million tax on Maryland residents who vacation in Ocean City, Montgomery County Sen. Benjamin F. Kramer (D-Montgomery) said, as he questioned the policy on the Senate floor.
“This is a $5 million tax hit on every one of your constituents who saved all year long to take the opportunity to join with their families and have a little vacation time in Ocean City, Maryland,” Kramer told senators, before launching into other arguments against the bill, including talking points typically employed by Republican lawmakers. “…I am concerned that Ocean City borders other jurisdictions. Those very tax dollars could easily leave Ocean City, Maryland, if we keep increasing taxes on our taxpayers … and they will simply go across state lines to the Delaware beaches, to the New Jersey beaches.”
The bill is sponsored by the “Eastern Shore senators” because it would enable the four code-rule counties on the shore — Caroline, Kent, Queen Anne’s, and Worcester — to hike their top hotel tax rate from 5% to 6%. But functionally the lead sponsor of the bill is Sen. Mary Beth Carozza (R), who represents Ocean City.
That resort town’s mayor and council asked the other shore counties for support in clearing the way for the enabling legislation to pass. Ocean City officials are expected to lobby Worcester County to increase the rate, but there are no plans for an increase in the other counties, senators said.
Hotel rental taxes are imposed in all counties in Maryland, ranging from 4% in Talbot County to 9.5% in Baltimore City and County. A few municipalities are also authorized to impose a hotel rental tax or to collect the county tax within their jurisdiction, including Ocean City.
Increasing the maximum hotel tax rate on the shore to 6% would raise an additional $444,900 in the four counties, but have a substantial financial impact in Ocean City: boosting hotel tax revenues by $4.4 million to $22 million annually.
Carozza, supporting the bill before the Budget & Taxation Committee, said the tax is an important dedicated source of funding for tourism and tourism-related activities and that each dollar invested in tourism marketing generates $31 in visitor spending.
Among the potential uses for the increased revenue is a new indoor sports facility, Ocean City leaders have said.
The bill passed out of the committee 11-1.
But the measure drew ire on the Senate floor, where some Democrats didn’t want to carry the weight of a tax-enabling bill sought by a Republican lawmaker.
As it became clear that the bill was in trouble, Senate Minority Leader Stephen S. Hershey Jr. (R-Upper Shore) moved to recommit the bill to committee. The move kept the bill from going down on the chamber floor and keeps it alive, along with a House bill that passed out of the House of Delegates chamber.
Kramer, in an interview, said he decided to raise the issue because he did not believe Republicans would support the proposed tax increase on the floor.
“They expected us to be patsies,” he said. “They were all going to put up red votes. When they realized the Dems weren’t going to pass it, they decided to recommit the bill.”
Carozza expressed disappointment with the result, noting that after a House bill by Del. Wayne Hartman (R-Lower Shore) failed to advance last year, Eastern Shore lawmakers and local officials worked hard to get the other code counties to commit to supporting the bill.
“Clearly local courtesy wasn’t extended in the Senate,” she said.
Asked whether her fellow Republicans would have voted against the measure on the Senate floor, Carozza conceded, “I don’t know.”
The same debate, albeit shorter, took place in the House of Delegates last week, when Del. David Moon (D-Montgomery) questioned the bill’s intent.
“I do like visiting Ocean City. I’m happy to throw in, I guess, a couple bucks on my hotel stay to help them finance this $150 million sports stadium. And so this Montgomery County Democrat endorses this bill and is going to vote for the GOP tax increase.”
The bill passed the House by a vote of 109-23, with a combination of Republicans and Democrats in opposition.
By Danielle E. Gaines and Josh Kurtz