Friends of the Rich


Maryland's House of Delegates has struck a blow for tax equity by eliminating a capital gains loophole that lets the rich get away with paying little or no state taxes. It is an advantage that 45 other states have eliminated but which Maryland retains because of the hospitable attitude toward this rich-person's loophole in the state Senate.

Will the Senate again this year defeat efforts to close this loophole that is costing the state and its subdivisions $55 million a year? Will that body, led by budget chairman Laurence Levitan of wealthy Montgomery County, come to the defense of those earning $200,000 or more a year?

Seventy-seven of Maryland's richest citizens paid no state income tax on average incomes of $430,000. According to the state comptroller's office, the capital gains loophole was a major reason: almost half of that average income came from that category.

Maryland lets taxpayers avoid paying taxes on 40 percent of all capital gains. That is a huge benefit for the wealthy. Now the House is about to pass a bill taxing all capital gains for individuals making more than $50,000 and couples making more than $100,000. People with smaller incomes still would get a break, though, paying taxes on only 80 percent of capital gains.

The result would be a more equitable tax structure, one that more closely dovetails with federal tax law, where the capital gains preference was repealed in 1986. But already Mr. Levitan is voicing opposition. Ironically, his own county of Montgomery -- facing a whopping $185 million budget deficit -- would be a prime beneficiary of this capital gains change, gaining $6.5 million to help close Rockville's budget gap. Other jurisdictions will also receive additional aid, though not as much as wealthy Montgomery.

Is the state Senate going to take up the cause of affluent Marylanders? Will senators become protectors and friends of the rich? We hope that common sense prevails among President Thomas V. Mike Miller and other Senate leaders as they try to balance the state's budget with a series of tax-raising proposals and sharp program cuts. The capital gains loophole should have been closed five years ago. It is time for the Senate to follow the House's lead and end this tax break for the rich.

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