Maryland’s New “Rain Tax” – Believe It Or Not, Here It Comes

On July 1st, ten of Maryland’s largest counties will impose a new “rain tax.”  Dubbed a “storm management fee,” residents and businesses will be forced to pay a new tax based on the amount of property surface area that does not absorb water, multiplied by the amount of rainfall causing “runoff” into the Chesapeake Bay.  The source of this controversial fee began when the Obama Administration’s EPA ordered Maryland to reduce levels of nitrogen and phosphorus in the Bay.  Maryland Governor O’Malley signed into law the directive that these costs are pushed down to counties, with a tax on so-called “impervious surfaces” causing water run-off.  In short, the EPA issued an unfunded $14.8 billion directive, and now Maryland’s ten largest counties are forced to foot the bill when it rains.

The method for calculating the rain tax has several flaws.  First, only the largest county residents and businesses get hit with this tax, which appears arbitrary.  Second, “impervious surfaces” will be measured by satellite, which will not be precise and cannot measure all differences between shared spaces.  Third, there is no method for exactly measuring differences in actual rainfall amounts between counties.  Fourth, there is no accounting for the fact that Counties closer to the Chesapeake Bay may contribute more runoff than other regions.  Fifth, the tax levies will not take into account harm to the economy – for example, shopping malls with large parking lots will be hit with larger tax increases, which will be passed on to tenants, who will be forced to raise prices on consumers.

The legislation does not even demonstrate how these new revenues will actually cause differences in nitrogen and phosphorus levels.  In fact, much of the money will go to paying for additional government employees, who will engage in new activities such as “mapping, assessment, monitoring, inspection, and enforcement.”  According to the Maryland government website, the funds “may be used for public education and outreach relating to stormwater management and stream restoration.”  In these difficult times, Maryland residents will not be pleased to shoulder a heavier tax burden to fund new ‘education.’

Aside from the absurdity of taxing rain (what is next, taxing air because exhaling carbon dioxide has a bad environmental impact?), the law poses several legal problems.  Opponents of this law could argue that it exceeds the state's taxing authority, and is applied in a manner that is arbitrary and capricious.  There could also be a Constitutional challenge, as well as claims that it violates Maryland’s Administrative Procedure Act.  While it is unclear if anyone will challenge this new law, the rest of the nation will watch with curiosity while Maryland residents ask themselves – “Is this really happening?”

Seth Berenzweig is a managing partner at the Washington, DC business law firm, Berenzweig Leonard, LLP.   He can be reached at sberenzweig@berenzweiglaw.com.