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Senate panel OKs income tax cuts for most Marylanders

A Maryland Senate committee approved tax cuts Thursday that would affect people at all income levels, and the governor's office signaled that it supported the reductions.

The Budget and Taxation Committee voted 11-2 to reduce income tax rates for high earners, expand a tax credit for the working poor and increase the income tax exemption for middle-income families.

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The tax cuts proposed by Democrats differed from those proposed by Republican Gov. Larry Hogan, but a spokesman said the governor saw any cut as a good cut.

Committee members called the Senate proposal a balanced approach.

"It seems logical that we're going to help out people at the bottom and the top," said committee Chairman Edward J. Kasemeyer, a Democrat who represents Howard and Baltimore counties.

The Senate panel rolled its more than $671 million in tax breaks over five years into a single bill that leaves out some of Hogan's highest-profile proposals.

Among those the committee sidetracked were Hogan's proposed income tax break for all retirees and his plan for broad reductions in various fees — part of a package of tax cuts only slightly smaller than the Senate plan.

Douglass Mayer, a spokesman for Hogan, praised the action as "a great sign and a testament to the progress made over the past year."

"Ultimately, the governor doesn't care whose name is on the bill or who claims credit — his only interest is in delivering the common-sense tax relief that Marylanders clearly want and deserve," Mayer said.

The committee took action on the same day the Senate unanimously passed Hogan's $42 billion proposed state budget and sent it the House of Delegates. The governor also hailed that vote as a victory, though he said some of the changes made by the Senate "are certainly matters of concern."

One measure agreed on by the Senate committee and governor was expansion of the Earned Income Tax Credit for the working poor. But the committee took a significantly different approach from the governor's, making more Marylanders eligible by extending benefits to childless taxpayers under 25 and increasing the amount of money other recipients would save.

Hogan had proposed that Maryland speed a planned expansion of the tax credit to working families with children.

A key part of the Senate plan is based on the recommendations of a commission led by former Lockheed Martin Chairman Norman R. Augustine that looked into ways to improve the state's competitiveness. The panel, created by Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, both Democrats, included in its recommendations a reduction in the personal income taxes paid by small and midsized businesses.

The committee decided to reduce the tax rates for individuals in the four top tax brackets by 1 percent to 3 percent.

The change would mostly benefit individuals earning more than $100,000 and couples earning more than $150,000. The committee had looked into restricting the break to so-called "pass-through entities" — mostly small businesses that pay personal income taxes — but decided that was not practical.

For middle-income taxpayers, especially those in the $50,000 to $100,000 range, the panel recommended increasing the personal income tax exemption from $3,200 to $3,400 over four years. When fully implemented that would bring the tax break for a family of four to $64 annually.

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The Senate panel's package drew criticism from a liberal-leaning think tank.

"This is a giveaway to the very wealthiest Marylanders, at the expense of everyone else. It can't legitimately be called middle-class tax relief," said Benjamin Orr, executive director of the Maryland Center on Economic Policy. Orr praised the decision to strengthen the Earned Income Tax Credit but panned the income tax cuts, saying they would give the top 1 percent of earners an average $2,500 tax break.

Montgomery County Democrats Richard S. Madaleno and Roger Manno voted against the package. Madaleno said he would rather err on the side of caution in cutting the income tax.

The committee's tax plan will go to the Senate floor next week. If approved, it would go to the House of Delegates, which has been drafting a significantly different tax cut bill.

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