Maryland leaders reach agreement on income tax hikes

Question of the Day

Is it still considered bad form to talk politics during a social gathering?

View results

ANNAPOLIS — The General Assembly will convene next week to pass a revenue package aimed at raising income tax rates on six-figure earners to pay for public services.

Lawmakers will consider legislation to raise taxes on the top 16 percent of earners, shift a portion of teacher pension costs to counties and undo more than $500 million in reductions that were slated to go into effect because the assembly adjourned last month without passing two notable financial bills.

Under the plan, income tax rates would increase for single filers earning more than $100,000 a year and couples earning more than $150,000.

Gov. Martin O'Malley, Senate President Thomas V. Mike Miller Jr. and House Speaker Michael E. Busch unveiled the plan Wednesday as lawmakers prepare for a special session that will begin Monday and is expected to last two or three days.

The Democratic leaders said revenue increases are needed to prevent education cuts and tuition increases and to protect funding for health and public safety.

“We need a balanced approach — the sort of balanced approach that’s allowed our state to weather this storm better than most states,” Mr. O'Malley said. “A cuts-only approach would help no one and would harm all of us.”

State budget analysts say the plan would bring state spending to about $35.5 billion next year.

It would raise spending by 2.6 percent over last year, which Mr. O'Malley said is the state’s third-smallest year-to-year increase in the past 20 years.

The final budget would be about $400 million smaller than the governor’s proposed budget earlier this year, but about $100 million larger than the “doomsday budget” that lawmakers passed last month.

The bills to be considered next week would add extra spending and revenue to the doomsday plan but would also make alternative cuts.

During the special session, lawmakers will consider a two-bill revenue package that is largely similar to one that House and Senate leaders agreed upon the final night of the regular session but ran out of time to pass.

The two chambers butted heads over exactly how to raise income taxes, but the House plan to add taxes to top earners will win out over the Senate’s proposal for hikes dipping further into the middle class.

The new plan would increase tax rates in most higher tax brackets by an 0.25 percentage point and would raise the state’s maximum tax rate from 5.5 percent to 5.75 percent.

It would also decrease or eliminate the value of personal exemptions in those brackets.

Officials say the changes will generate about $247 million in new revenue next year.

Senate Democrats said they hoped for broader increases to help further reduce the state’s $1 billion structural deficit and warned that smaller hikes could leave the door open for future revenue increases or spending cuts.

Senate members said they were able to persuade the House to cut an extra $100 million in spending and add more money to the state’s rainy-day fund, creating a $204 million fund balance for the year.

Lawmakers say this year’s budget would trim more than half of the structural deficit, which estimates projected gaps between revenue and spending in future years.

“We felt strongly that everyone needed to participate to give us a higher fund balance,” said Sen. Nathaniel J. McFadden, Baltimore Democrat. “We didn’t prevail so we’ll have to come back essentially and go through the same process.”

The Senate Budget and Taxation Committee will hold hearings Monday on the two bills and the Senate could pass them by the end of the day, Mr. Miller said. The legislation would then move to the House.

The committee will also hear testimony on a bill allotting $15 million for school renovations. Senate members said the bill already passed during the regular session but may have to be approved again due to concerns over the legality of it having been passed before the state budget.

Republicans are expected to propose competing budget proposals that would call for level or decreased spending over last year’s budget, although they are unlikely to receive much consideration from majority Democrats.

Senate Minority Leader E.J. Pipkin, Cecil Republican, harshly criticized the governor Wednesday and said more taxes will only harm the state’s economic recovery.

The governor’s “never-ending greed for revenue increases is topped only by his callous disregard for Maryland taxpayers and families,” Mr. Pipkin said. “I will do everything I can to prevent another session of picking Maryland pockets clean.”

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.

Comments
blog comments powered by Disqus
TWT Video Picks