Maryland Gov. Larry Hogan is proposing spending a chunk of Maryland’s budget surplus on a series of tax cuts for retirees, the state’s lowest earners and manufacturers that he hopes the Democrat-controlled Maryland General Assembly will agree to pass during the upcoming legislative session.
Hogan touted the proposal as “the largest tax cut package in state history” at a news conference Tuesday at the State House in Annapolis, but released only broad details of the plan and did not provide an annual breakdown of how much revenue the breaks would cost the state.
Key Democrats said they’d consider Hogan’s latest proposals but needed to see precise details — and the long-term impact on the state’s finances — before taking a position.
The package would, according to Hogan, eventually eliminate all state income taxes on retirees. That’s a step further than a series of smaller retirement tax cuts that the Republican governor has proposed — with only limited success — during his previous seven years in office.
Another tax break would involve making last year’s expansion of the state-level Earned Income Tax Credit, which refunds tax money to lower-income wage earners, permanent. A state coronavirus recovery package boosted refunds for Maryland taxpayers who qualified for the federal Earned Income Tax Credit. The additional state benefits are slated to expire after the 2023 tax season but could be renewed by lawmakers.
Hogan also pitched extending a state tax break through 2027 for manufacturers that relocate or expand operations within Maryland. That program is currently slated to begin phasing out later this year. And Hogan asked lawmakers to keep a COVID-19 incentives program for commercial real estate properties and to waive filing fees — which range from $100 to $300 — for corporations, limited-liability companies and farms that file annual business reports online.
Maryland finished its most recent budget year, which ended last June 30, with an extra $2.5 billion left over. And projections show that the state will continue to have billions extra for the next several budget years. That’s led to various proposals of how to spend the money, ranging from one-time construction projects to long-term tax cuts.
Del. Eric Luedtke, the majority leader in the House of Delegates, said Democrats would consider Hogan’s proposals.
“We’ll take a look when we get it in writing,” said Luedtke, of Montgomery County.
He noted that House Speaker Adrienne A. Jones already made clear that any proposals will be scrutinized for whether they help “middle-class and working-class families that have been hit hard by the pandemic.”
“We’ve got a very unique opportunity this year to consider a lot of proposals and we’ll really give it all a fair look,” said Sen. Guy Guzzone, a Howard County Democrat who chairs the Budget and Taxation Committee. “We need to see the actual numbers on paper.”
Both Jones and Senate President Bill Ferguson have said they prefer spending most of the state’s current budget surplus on one-time investments and have warned against moves that could drive down state revenues permanently or create new long-term spending commitments.
But neither Ferguson nor Jones completely ruled out considering tax cuts in interviews with The Baltimore Sun last week.
“There are opportunities to look at addressing tax burdens in the state, but it’s going to be very targeted and purposeful,” said Ferguson, a Baltimore Democrat. “We’re open to conversations.”
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Jones, a Baltimore County Democrat, said she prefers “making critical upgrades” rather than agreeing to new long-term spending but indicated she could support a tax cut proposal that “helps those who need it most” rather than “those who already have the most.”
Republican lawmakers, who are outnumbered 2-to-1 in the General Assembly, already have championed tax cuts among their top priorities this year. Speaking to reporters before the governor’s announcement, Republican leaders acknowledged that Hogan’s past efforts at tax cuts haven’t gone very far in the Democrat-led legislature.
They hope that with an election looming, Democrats might be more willing to negotiate on tax breaks. Tax cuts, after all, are often popular with voters.
“I think we have a greater possibility this year because they know people are watching,” said Sen. Bryan Simonaire, the Senate Republican leader
State lawmakers need to take the opportunity of the budget surplus to bring down the cost of living in the state, said Sen. Justin Ready of Carroll County, the second-ranking Republican leader in his chamber.
“Inflation is eating into people’s bottom line and budgets,” Ready said, and working families “really take it the hardest.”
Ready also suggested that taxes are too high for retirees, who may leave for states with lower taxes. Maryland doesn’t need to be the cheapest state to retire in, but “we just can’t be the worst in the region.”