The Honorable Thomas V. Mike Miller, Jr.
President of the Senate
Annapolis MD 21401
Dear Mr. President:
In accordance with Article II, Section 17 of the Maryland Constitution, I have today vetoed Senate Bill 408 - Sales and Use Tax - Exemption for Bottled Water.
Senate Bill 408 exempts from the sales and use tax the sale of water for human consumption sold in containers of one gallon or more. The measure will result in a revenue loss to the general fund of $2.2 million in fiscal year 2001 and $11.7 million over a five-year period.
As originally introduced, Senate Bill 408 would exempt almost all bottled water from the sales and use tax, regardless of the size of the container. The measure was subsequently amended to limit the tax exemption to water sold in containers of one gallon or greater. During the floor debate on Senate Bill 408, supporters emphasized that the measure was necessary to provide tax relief to rural residents who cannot use their well water and must rely on bottled water for drinking. The reasons most often cited for this condition are contaminated ground water and dry wells due to seasonal droughts. The General Assembly's concern for rural homeowners who live with contaminated groundwater is one that I share. That is precisely why I proposed targeted grants and tax credits during the 2000 Session to offset all or most of the cost of upgrading failed septic systems for lower-income homeowners.
My objection to this legislation is that these rural families will receive very little of the $2.2 million in annual foregone revenues. Of the estimated 50 million gallons of water sold in containers of one gallon or more in Maryland, most are sold to businesses and consumers on local water systems or with functional wells. Most of the tax savings from Senate Bill 408, therefore, will not go to the rural homeowners who are the stated intended beneficiaries of the bill.
In concert with my view that the sales tax exemption on bottled water is too broad, I am concerned about the fiscal cost of this legislation given other general fund commitments enacted during the 2000 Session. I believe the $11.7 million over five years would be better devoted to on-going State commitments in priority areas such as education and the environment.
For the above reasons, I have vetoed Senate Bill 408.
Parris N. Glendening