After a virtual rally resulted in a petition signed by over 6,500 Marylanders calling on the state to provide additional financial support, Governor Larry Hogan announced the Recovery for the Economy, Livelihoods, Industries, Entrepreneurs and Families Act (RELIEF Act of 2021) which among other things provides tax relief to struggling Marylanders and small businesses.¹

In response to the COVID-19 pandemic Maryland businesses were shut down and stay at home orders were enforced to prevent the spread of coronavirus.² There are more than 580,000 small businesses in Maryland and they employ more than 1 million people.³ Unfortunately, shutdowns resulted in failing businesses and unemployment.⁴ During the COVID-19 pandemic Maryland’s unemployment rate rose to an all-time high of 9.9%.⁵ Despite financial assistance from the federal government Marylanders are still struggling.⁶ Further, economists do not expect a full recovery of the economy until 2024 or 2025.⁷

To help Maryland recover, Governor Hogan introduced the RELIEF Act (“the Act”) which if signed into law will provide emergency stimulus and tax relief by automatically distributing $1 billion for Maryland families, small businesses, and those who have lost their jobs.⁸ Specifically, the Act will provide $500 stimulus payments to families and $300 stimulus payments to individuals who filed for the Earned Income Tax Credit, followed by a possible second-round stimulus for those who meet certain requirements.⁹ In addition, the Act repeals state and local income taxes on unemployment benefits and extends unemployment tax relief for small businesses.¹⁰ The Act will support small businesses by providing sales tax credits of up to $3,000 per month for four months.¹¹ The Act will be funded by a combination of the surplus at the end of Fiscal Year 2020 and a portion of the state’s rainy day fund.¹²

Comptroller Peter Franchot critiqued Governor Hogan stating that the Act falls short in helping Maryland families.¹³ Franchot suggested that Governor Hogan take executive action by using $1.5 billion from the state’s rainy day fund to provide faster and larger payments to Marylanders in need.¹⁴ In response, Governor Hogan said Franchot’s plan would drain the state’s rainy day fund.¹⁵

Rainy day funds are a key tool that states use in combination with their general fund surpluses as a buffer against revenue declines.¹⁶ States that do not have enough saved in their rainy day funds will need to increase savings in their respective funds to avoid spending cuts and tax hikes during the average recession.¹⁷ A 2015 study found that Maryland could weather a mild recession, but not an average or severe recession.¹⁸ Governor Hogan made it clear that he will do what he can to prevent raising taxes.¹⁹ Maryland will be recovering from the effects of COVID- 19 for the next several years and as a result will need to conserve the rainy day fund.²⁰

Given the state of Maryland’s economy, Governor Hogan’s concern over a depleted rainy day fund, and economists estimations that full recovery will not happen until 2024 or 2025, the RELIEF Act seems like the more appropriate route as opposed to an executive order. Further, given that coronavirus relief and economic recovery seem to be lawmakers top priorities Maryland can be hopeful that the Act will be passed.²¹ Although some legislative leaders did not endorse the Act they openly expressed their intentions to make 2021 a year of “rebuilding and recovery.”²²

Candice Miller is a third-year law student at the University of Baltimore School of Law, where she serves as an Associate Editor for Law Forum. Additionally, Candice completed her second semester as a student attorney with the UB Law Tax Clinic, is a Student Liaison for the ABA Law Practice Division and is a Student Ambassador for the MSBA. In January 2021, Candice will begin a legal internship with Frost Law, where she will continue to work on a variety of tax and estate matters. Candice will graduate with her Juris Doctor in May 2021 and her Master of Laws in Taxation in 2022. Upon completing her Juris Doctor, Candice will begin clerking for the Honorable Kevin F. Arthur on the Court of Special Appeals of Maryland.

¹ WMAR Staff, Maryland Leaders Call on Gov. Hogan to Release Rainy Day Funds During COVID-19 Emergency, WMAR (Jan. 11, 2020), https://www.wmar2news.com/news/local-news/maryland-leaders- call-on-gov-hogan-to-release-rainy-day-funds-during-covid-19-emergency.

² Carol Park, How Will the Coronavirus Outbreak Affect Maryland’s Economy?, MDPOLICY (Mar. 18, 2020), https://www.mdpolicy.org/policyblog/detail/how-will-the-coronavirus-outbreak-affect-marylands- economy.

³ Id.

⁴ Kate Amara & Kim Dacey, Hogan Announces New COVID-19 Relief for Businesses, No New Restrictions, WBALTV (Dec. 10, 2020), https://www.wbaltv.com/article/covid-19-update-maryland- governor-larry-hogan/34921790.

⁵ Holden Wilen, Maryland Loses 349,000 Jobs in April, Unemployment Rate Hits Record High, BIZJOURNALS (May 22, 2020), https://www.bizjournals.com/baltimore/news/2020/05/22/maryland- unemployment-hits-record-high.html.

⁶ David Collins, Gov. Larry Hogan Unveils ‘Economic Recovery Budget for Maryland, WBALTV (Jan. 19, 2021), https://www.wbaltv.com/article/maryland-gov-larry-hogan-2022-economic-recovery-budget- state-budget/35257389#.

⁷ Amara & Dacey, supra note 4.

⁸ The Office of Governor Larry Hogan, Governor Hogan Announces $1 Billion Emergency Stimulus and Tax Relief Package, MARYLAND.GOV (Jan. 11, 2021), https://governor.maryland.gov/2021/01/11/governor-hogan-announces-1-billion-emergency-stimulus-and- tax-relief-package/.

⁹ Id.⁸ The Office of Governor Larry Hogan, Governor Hogan Announces $1 Billion Emergency Stimulus and Tax Relief Package, MARYLAND.GOV (Jan. 11, 2021), https://governor.maryland.gov/2021/01/11/governor-hogan-announces-1-billion-emergency-stimulus-and- tax-relief-package/.

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³ Madeleine O’Neill, Hogan Proposes $1 Billion Economic Relief Bill, Stimulus Checks for Marylanders in Need, USA TODAY NETWORK (Jan. 11, 2021),

https://www.delmarvanow.com/story/news/local/maryland/2021/01/11/hogan-announcement-earned- income-tax-credit-economic-md-relief-bill-stimulus-check/6620365002/.

¹⁴ Id.

¹⁵ Id.

¹⁶ Erick Elder, Weathering the Next Recession: How Prepared is Maryland?, MERCATUS CENTER, https://www.mercatus.org/publications/weathering-next-recession-how-prepared-maryland.

¹⁷ Id.

¹⁸ Id.

¹⁹ Pamela Wood & Bryn Stole, Maryland Gov. Hogan Proposes $1 Billion COVID-19 Relief Legislation, Including Stimulus Payments to Some Residents, BALT. SUN (Jan. 11, 2021). https://www.baltimoresun.com/coronavirus/bs-md-hogan-economic-relief-20210111- jurs5piasfextlyt4fon6yjbwe-story.html.

²⁰ Erick, supra note 16.

²¹ Wood & Stole, supra note 19.

²² Id.