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Miller calls tax break threshold issue most difficult

Senate President Thomas V. Mike Miller Jr. said the parts of Gov.Martin O'Malley's budget proposal capping the income levels at which taxpayers can make full use of income tax exemptions and reduction will be the most difficult to get through the General Assembly.

Miller said the provisions are particularly controversial because they would affect many middle-class families, including couples who together make as little as $100,000 a year in taxable income.

Speaking to reporters after Thursday morning's Senate session, Miller said he was "not sure" whether the governor would have to raise those thresholds in order to win passsage of an income tax increase. The plan does not raise rates, but exemptions would begin to phase out at a household income of $100,000 and the personal exemption would begin to go away at $125,000 for individuals and $175,000 for joint filers.

The administration says the proposal would affect two out of 10 Maryland households, but Miller said it takes in a lot of people who aren't rich.

"It's definitely middlle-class, especially if it's combined income," the Calvert County Democrat said.

Miller would not label the proposal unfair, saying "life is unfair in general." He said it could also be seen as inequitable if the proposal sought to collect more taxes from a smaller group of upper-income taxpayers.

"What we need to do is have a fair system of taxation," he said. ""We don't want to overtax anyone but at the same time we have to stay No. 1 in education."

Maryland public schools have been ranked in the top spot nationally the past four years -- a point both O'Malley and Miller have pointed to with pride.

Miller said that on Wednesday he held discussions with some of the county executives of the larger jurisdictions. He said they don't like O'Malley's proposal to shift $240 million in pension costs from the state  to the counties but know it's a issue they must deal with.

"They recognize it has to come to an end, the current system," he said. The state now pays 100 percent of teacher pension costs. O'Malley would combine the sums the state pays for pensions and the counties pay toward Social Security and split the total 50-50 -- a formulation that favors the state. Miller is a longtime advocate of such a shift.

Miller said the executives told him they appreciate the measures O'Malley is proposing to offset the new burden they would bear but are concerned those provisions -- which are tied to tax increases -- would fail at the same time the cost-shifting passed.

The Senate president repeated that the governor will have to work hard with each member of the Senate and House to reach an agreement -- especially on the tax issues.

"It's going to be a tough sell for everyone," he said. "the problem is there's no palatable level (of taxation). The public's not acceptive of it."

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