That's the calculation of the Maryland General Assembly, which is counting on the additional $328.5 million the increase is projected to raise over three years to help pay for the cost of repealing an ill-received computer services tax.
According to the Department of Legislative Services, there were roughly 6,300 households that filed returns in 2005 with a taxable income of more than $1 million. That amounts to 0.3 percent of those who filed that year. Most filed jointly.
The average income reported by those in the new bracket was $3.1 million. That translates to an extra $15,000 a year for three years until the surcharge sunsets - or just about the $45,000 that would put a mid-range BMW in the three-car garage - compared with the law at the beginning of the session. (In some cases, some of that extra cost could be offset by federal tax deductions.)
FOR THE RECORD - An article in Wednesday's editions of The Sun stated that the new 6.25 percent tax rate adopted by the General Assembly would be the nation's first millionaire's tax bracket in the United States. A provision of California law, approved by a ballot proposition, imposes an additional 1 percent tax on income over $1 million to fund mental health programs. According to the California Franchise Tax Board, the levy is not considered a tax bracket under state law, but the result for the taxpayer is similar.
Faced with more than a $1 billion shortfall between anticipated revenues and expected expenses - the so-called structural deficit - O'Malley called a special session late last year in which he proposed to raise income taxes on higher-income earners. His plan included a so-called "millionaires' bracket" of 6.5 percent for income above $1 million.
That idea ran into resistance from legislators from Montgomery County, where millionaires abound. They gave O'Malley roughly a half a loaf, capping the top rate at 5.5 percent for income above $500,000.
But that left the state short of its goal of closing the budget gap, so legislators - casting about for something to tax that wouldn't offend a powerful lobby - hit on the idea of a computer services tax. The reaction to the computer tax - especially from high-tech industries and business consumers of information services - was almost unanimously negative.
By the end of the session, the idea of taxing the rich wasn't looking so bad to many of the Assembly's leaders. O'Malley jumped aboard the repeal bandwagon and re-endorsed the millionaires' tax.
"I've had numerous people come up to me in the course of these last few months and whisper to me that they are in that highest bracket of millionaires and they are willing and they are able to pay their fair share," he said.
Ed Hale, chief executive of First Mariner Bank in Baltimore, said he told O'Malley the computer tax had to go - even if he had to pay more in income tax.
