In a year when extensive state budget cuts are forecast, legislators are looking at one more possible way to boost revenue besides possibly raising the tax on alcohol and/or gasoline — reinstating the income tax surcharge on people who annually make $1 million or more.
None of Howard's 11 state legislators is enthusiastic about the idea, though several said it might win support in the end, depending on other options for resolving the projected $1.6 billion revenue shortfall next fiscal year. The county's three Republicans, joined by one Democratic delegate, said they are opposed. County Executive Ken Ulman, a Democrat, said the surcharge was enacted as a temporary measure for a specific period and should not be brought back.
For the 2008 through 2010 calendar years, the state's highest personal income tax rate was 6.25 percent instead of 5.5 percent, but the higher rate ended Dec. 31. To continue it, as several groups and legislators from Baltimore City and Montgomery County have suggested, would require new legislation.
"It probably makes sense to let it sunset," Ulman said, acknowledging that "at the same time, we're obviously concerned about revenues."
Del. Steven J. DeBoy, a Democrat who represents parts of Elkridge and nearby Baltimore County, also opposes extending the tax, noting he voted against it at inception in 2007.
"I didn't think it was right that we put an additional tax on our people who have done well," he said Tuesday morning at a Howard Community College legislative breakfast that illustrated the state's fiscal problems.
College President Kathleen Hetherington talked about sharply rising enrollments and the need for new college buildings. Enrollment rose 9 percent last fall instead of the projected 3 percent, she said, and registrations for spring are up 17 percent, she added, telling legislators and County Council members that "we are looking forward to your support in the coming year."
Gov. Martin O'Malley hasn't released his proposed budget, though he has repeatedly said he will propose spending cuts, not tax increases.
If the income tax surcharge were in effect this year, it would produce about $56 million in revenue, according to the state comptroller's office. That would be split between the current state budget year, which ends June 30, and fiscal 2012, which begins July 1.
The effect of higher taxes on the rich are hotly debated, though a survey of millionaire families released in late September by Phoenix Marketing International had Maryland with the second-highest concentration of millionaires per capita in the nation at 6.8 percent of population, behind only Hawaii at 6.9 percent. The number of families nationally with at least $1 million in liquid, nonretirement assets grew in 2010 for the first time in two years, the report said. Phoenix is a national research firm based in Rhinebeck, N.Y.
Howard's Democratic legislators say they are considering all the options.
"I think everything's on the table," said Del. Frank S. Turner, a Democrat who serves on the tax writing House Ways and Means Committee which will vote on each tax proposal.
"It is certainly something I would consider," said Del. Guy Guzzone, a Democrat on the House Appropriations Committee who noted the tax applies only to those with incomes over $1 million a year, not people with total assets over that amount.
"When you compare it to the other options, it's not actually one I would exclude," said Del. Elizabeth Bobo, a Democrat who is chairwoman of the county's House delegation and is worried about possible cuts in services to low-income people.
"Generally, I'm going into this session not aggressively supporting any new taxes," he said. But under the right circumstances, he said, "that would be one that could conceivably happen."
Other Democrats, including county Senate delegation chairman Sen. James N. Robey and Del. James Malone, were neutral on the idea for now. Del. Shane Pendergrass was also noncommittal, though she guessed that if the idea makes it to a House floor vote she'd support it as she did in 2007.
But Republicans are vehemently against extending the income tax surcharge, using arguments heard frequently during last year's gubernatorial campaign that such a tax is counterproductive because it punishes the very people the state needs to create more private sector jobs.
"That's a terrible idea," said Senate Minority Leader Allan H. Kittleman. Low income families are already provided for in Maryland, the Republican added. "Millionaires are mobile and they will leave."
Fellow Republican Dels. Gail H. Bates and Warren E. Miller agreed, with Miller warning that federal spending in Maryland will likely be scaled back as the Obama administration and the Republican-led Congress make cuts to limit the deficit's growth. "I'm not looking at a rosy future for Maryland in the short term," he said, and taxing the rich "is fool's gold."
Bates said some small business owners might appear to have huge personal incomes, but only because their returns reflect their business revenue. The higher income tax is "class warfare," she said.
"We absolutely need to get our fiscal house in order" by cutting state spending for entitlements, she said, instead of raising taxes to pay for benefits the state can't afford.
Ulman back after surgery
A stiff, slow-moving Ulman showed up to visit and promote a row of retail businesses carved out of a warehouse along Dobbin Road in East Columbia on Monday afternoon, explaining that he'd undergone outpatient back surgery Dec. 29 and was still recovering. He'd had similar surgery for a partially herniated disc in December 2009, but said a few bone fragments caused him renewed pain in recent months.
Ulman visited a popular brew pub that relocated from farther north on Dobbin, a small furniture store sales center and a battery store, praising the owners for "taking the risk investing in this economy."