Legislators' tax error costs many $90

February 12, 1993|By Ross Hetrick | Ross Hetrick,Staff Writer

Because of an oversight when tax legislation was hastily pushed through the General Assembly last year, thousands of Maryland couples -- particularly those who are retired or self-employed -- could lose out on a $90 break on their state and local income taxes this year.

State lawmakers admit the mistake, and a bill has been introduced in the current session to restore the benefit for 1993 ,, returns. But some affected taxpayers say the change should apply to 1992 returns.

The problem stems from the legislature's effort to simplify the state tax form by eliminating the so-called combined-separate return for couples and substituting it with a single column for total income, similar to that used in federal returns.

The "combined-separate" method of filing saved couples $90 because it allowed the first $3,000 of each spouse's income, for a total of $6,000, to be taxed at 3 percent; income between $3,000 and $150,000 is taxed at 5 percent. The 2 percentage-point difference saved couples $60 in state taxes and $30 in local taxes at the piggyback rate of 50 percent.

The new form uses a single column for all income. As a result, only $3,000 can be taxed at the 3 percent rate, wiping out the $90 advantage.

The state was aware of the loss and tried to deal with it by enacting a new deduction of up to $1,200 for working couples. However, the deduction applies only when both spouses have wage or salary income.

If either or both spouses are retired, self-employed, or receive other types of income, they do not qualify for the deduction.

"We made a mistake," said Sen. Laurence Levitan, D-Montgomery County, chairman of the state Senate's Budget and Taxation Committee.

"Everything got put together pretty fast last year, and that was one of the things that didn't get caught," he said.

Last year, about 21 percent -- or 459,623 -- of the 2.2 million state returns used the combined-separate return, according to Marvin Bond, the assistant state comptroller. Although the state could not provide figures, the majority of the combined-separate forms were from two-wage couples.

Mr. Bond said the comptroller's office did not become aware of the glitch until after the tax revisions became law in July and informed Mr. Levitan of the problem.

Mr. Levitan, who is sponsoring the bill in the Senate, said he expects it to be easily approved.

But, he said, it would be too difficult to make the bill apply to 1992. The bill would not be effective until July 1, and taxpayers would have to submit amended forms, he said.

"It's too tough to make it retroactive," he said.

But affected taxpayers say they should not have to pay for a mistake made by the legislature.

"Ninety dollars is ninety dollars," said Renan S. Todes, 67, who lives on the pension and Social Security payments that he and his wife, Josephine, receive. "If you [the legislature] make a mistake, correct it this year."

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