ANNAPOLIS — Gov.Martin O'Malleysaid this proposed capping income tax deductions and rolling back income tax exemptions for Maryland's highest earners as part of his plan to close the $1 billion hole in the state's $14 billion operating budget.

O'Malley's plan, unveiled Wednesday, Jan. 18, would begin capping deductions for Marylanders making more than $100,000 and reduce exemptions for singles making more than $100,000 and couples making more than $150,000.


The exemptions would disappear for singles at $125,000, and couples at $175,000.

The governor said that only two out of every 10 Maryland residents would receive a smaller amount in their refund check as a result.

"In order to get us through this recession in advance of other states, and in order to protect the priorities of the people of our state and the futures of our children, there are difficult things we need to ask of one another in these difficult times, and this is one of them," O'Malley said.

O'Malley's overall proposal includes $610 million in reductions and cuts to the General Fund, but the budget is still set to grow by 1.9 percent in fiscal year 2013.

Among cuts affecting Carroll County, the governor said he wants to close two assisted living facilities — at Springfield Hospital Center in Sykesville, and also at the Spring Grove Hospital Center in Catonsville. The governor said his plan would eliminate 149 state jobs, mostly related to those centers closing.

Though O'Malley said his budget proposal is not reliant upon raising the state's gas tax, he said this is still under consideration, as is an increase in the flush tax on sewer bills.

Critics were quick to point out these taxes would add up.

"It's death by incrementalism," said 4th District Sen. David Brinkley, a Republican who represents Carroll and Frederick counties.

Also controversial is the governor's plan to shift half the burden of teacher pension costs from the state onto county governments.

Though the state will take on 50 percent of retired teacher Social Security costs in turn, the proposal projects $239 million in additional costs for local governments.

"I have become convinced that some better sharing of that responsibility is in order, primarily because the counties are much closer to the negotiating table than the state is," O'Malley said.

The governor said job creation remained his No. 1 priority — and said the budget was the best at creating and supporting jobs since the recession began.

His plan would allocate $373 million toward school construction. However, an increase in the gas or flush tax could conflict with this aim, according to critics.

"He doesn't know how to create a private sector job," Brinkley said.


Kelsey Miller of Capital News Service and Annie Linskey and Michael Dresser of the Baltimore Sun contributed to this report.