ANNAPOLIS — Maryland Gov. Larry Hogan on Tuesday proposed enticing manufacturers to set up shop in the state’s economically barren jurisdictions with a decadelong tax break as part of his plan to relieve retirees, poor working families and small businesses of “burdensome” taxes.
At a news conference on the day before the General Assembly opens its legislative session, Mr. Hogan said his tax plan would save retirees, poor working families and the smallest of small businesses about $400 million over five years, adding that he also wants to cut fees for birth and death certificates and fishing licenses.
Historically, Maryland’s Democratic-controlled legislature has been wary of tax break legislation, but the Republican governor hopes his “common-sense” and “bipartisan” proposition will be received well by Democrats.
“I can’t imagine any member of the legislature, from any party, possibly having a problem with providing tax relief to retirees on a fixed income, struggling working families or struggling small businesses,” he said. “I would say anyone that isn’t in favor of that probably doesn’t deserve to be in the legislature. I don’t understand how anybody would oppose these common sense measures.”
Mr. Hogan already has moved forward on cutting and eliminating fees without the legislature’s help, such as reducing E-Z Pass fees, but many of the other fees and taxes he would like to see rescinded or ended are in statute and require the legislature’s assistance.
His proposal includes increasing the personal property tax exemption for seniors from $1,000 to $5,000 over five years and reducing the annual small business filing fee by $50 a year, from $300 to $100 over four years.
Democrats rebuked Mr. Hogan’s strong language but suggested that they could support his initiatives, especially if he keeps an open mind on their agenda.
“That’s stepping over the line. We can disagree,” Delegate Maggie McIntosh, Baltimore Democrat and chair of the House Appropriations Committee, said of Mr. Hogan’s comment. “It’s all right. We don’t have to demonize each other.”
Mr. Hogan proposed speeding up the process of increasing the earned income tax credit (EITC ) for poor families, legislation Democrats already have introduced, Ms. McIntosh said.
The legislature in 2014 passed a law that increased the EITC tax breaks by 3 percent over four years, and Mr. Hogan suggested that for families earning less than $53,000 a year, that tax break could go into effect two years earlier than planned. About 13 percent of the state’s households claim the credit, but many more qualify and are not claiming it.
“The earned income is one of the best, most successful tools we have to help working people grow themselves and their families and move out of poverty,” said Ms. McIntosh. “We need to do more in terms of expansion.”
She also said that Mr. Hogan’s proposed manufacturer tax break for 10 years would help revitalize the economy in beleaguered places like her district, saying that “this is what they need.”
Republican leaders in the House said that while Mr. Hogan has not revealed how these tax breaks will be paid for, the state is financially secure and able to expend these sources of income.
“Nothing’s certain, because we’re in a global economy and things can change tomorrow. But Maryland’s economic situation is really healthy right now, and I would say that now’s the time to fix our tax structure,” said House Minority Leader Nicholaus Kipke.
The state needs to get “competitive” in lowering tax rates and not scaring away retirees on fixed incomes, said Mr. Kipke, Anne Arundel Republican.
Manufacturing businesses have been fleeing the state, Mr. Hogan said, so he is seeking to lure them back by promising no state corporate income taxes for 10 years and no income taxes for workers of these new businesses earning less than $65,000.
“We’ve lost 28 percent our manufacturing base because other states were stealing our manufacturers,” the governor said. “It was like spearing a fish in a barrel. It was too easy. We’re trying to bring back the manufacturing base because there are a lot of hard-working people in the heartland of Maryland who want to work.”
These “empowerment zones,” as Mr. Hogan called them, would include Cumberland in Western Maryland, the lower Eastern Shore and Baltimore city, and offer skilled workers with no employment opportunities to find jobs. These areas have the highest unemployment in the state and the highest percentage of people who claim the earned income tax credit.
House Minority Whip Kathy Szeliga said Mr. Hogan’s proposal would likely go over well with Democrats in the legislature.
“It will certainly be hard for them to work against and vote against the people they try to champion,” said Ms. Szeliga, Baltimore County Republican. “As they claim to be champions for the poor, how can you vote against helping the poor?”
The tax package, which would cost about $480 million over five years if fully passed by the legislature, amounts to about $57 in annual savings for retirees, $31 for poor working families and $109 for small businesses.
But Mr. Kipke said it’s not just the savings that matters — rather, it’s the message the action sends to Marylanders about the government’s commitment to rolling back taxes.
“The bottom line is if you don’t do these things, people will leave, and the data has proved that to be true. Independent IRS data shows that Maryland has been a big loser when it comes to where people decide to retire, and it has not always been that way,” Mr. Kipke said. “We don’t have to be the lowest taxed place in the world, but we cannot be the highest.”
It’s been 10 years since the General Assembly has convened with a budget surplus. The legislature expects about $500 million in surplus by the end of the current year’s budget, and a $300 million surplus is expected by the end of next year’s budget.
Mr. Hogan’s tax agenda will work in conjunction with the annual state budget, which will be in the neighborhood of $40 billion. The budget will be released by the end of the month, he said.