House poised to approve income tax increase

Senate passes revenue measure, teacher pension shift

May 15, 2012|By Annie Linskey and Michael Dresser, The Baltimore Sun

After beating back a series of challenges in the House of Delegates, lawmakers are poised to give final approval Wednesday to a plan to raise the state income tax to fund schools, police and Medicaid.

The legislation, introduced Monday by Gov. Martin O'Malley and backed by the Democratic leaders of the House and Senate, would subject top-earning Marylanders to the seventh-highest income tax rate in the country, according to the National Tax Foundation. Their rate now ranks 10th.

The measure also would raise taxes on some tobacco products and fees on some state transactions.

Meeting in special session, the state Senate passed the legislation Tuesday, and Speaker Michael E. Busch said he believes he will have the 71 votes needed to approve the measure in the House.

Passage would wipe out the so-called Doomsday budget and clear the political thicket Democrats wandered into when they failed to enact a spending plan last month at the end of the regular legislative session.

The revenue plan would raise tax rates for individuals making more than $100,000 a year and for joint filers who earn more than $150,000. It hits suburban communities hardest, with 75 percent of the burden falling on taxpayers in Anne Arundel, Baltimore, Howard and Montgomery counties.

"This exercise is about making sure we maintain funding for things that matter to us," said House Democratic Leader Kumar P. Barve. Speaking Tuesday on the House floor, the Montgomery County lawmaker told colleagues that his own taxes would go up about $9 a week.

"That is a price that I'm willing to pay," Barve said.

Republicans fought back all day — but with little impact.

"We are raising spending, we are raising taxes and we don't need to," House Republican Leader Anthony J. O'Donnell thundered. But a series of GOP amendments were easily defeated by the Democratic majority.

GOP lawmakers, who were fine with the cuts in the Doomsday budget, warned that the changes would hamper the state's fragile economic recovery.

Specifically, they said, the tax increases would hurt firms organized as S corporations, usually small businesses that pay individual rates instead of corporate taxes.

O'Malley, a Democrat, had avoided making any changes to the state's income tax rates during the regular session. His budget proposal would have phased out exemptions and deductions for higher earners.

Most members of the House and Senate wanted to raise the rates but could not finish their budget by the April 9 deadline.

In Baltimore, taxpayers who earn more than $100,000 and couples who earn more than $150,000 would see an average increase of $602. In Baltimore County, the average increase would be $758; in Howard, it would be $575.

The General Assembly also moved forward on a measure that would shift some of the costs of teacher pensions to local governments. That item cleared the Senate on Tuesday and moved to the House, where a final vote is expected Wednesday morning.

In the House, the tax package faced challenges from both the left and the right Tuesday afternoon.

A handful of Democrats from Montgomery County wanted the state to raise the state's sales tax by a penny on the dollar instead of changing income taxes. Pushed by Del. Charles E. Barkley of Montgomery County, that proposal would have raised at least $700 million in revenue, reducing the chances that the Assembly would be asked to increase taxes again.

"People are not going to be happy with you anyway" for raising taxes, Barkley warned. "We ought to do the right amount of taxes so we can address other needs."

His idea failed to gain traction and was defeated on a voice vote.

GOP lawmakers objected to any rise in taxes. Del. Wade Kach, a Baltimore County Republican, offered an amendment that would have gutted the income tax increases.

"Tax increases are not the answer," he said. "They are not what is going to solve the problems in the state of Maryland."

Earlier in the day, the Senate passed both the income tax increase and the teacher pension shift.

The vote on the tax measure was 27-19 as seven Democrats joined the chamber's 12 Republicans in voting no. The vote on the teacher pension shift was 33-13, with 11 Republicans and two Democrats opposing the bill.

The Senate action took place after a vigorous but civil debate during which Republican senators decried O'Malley's record of raising taxes and fees during his six years in office.

Senate Minority Leader E.J. Pipkin, an Upper Shore Republican, said the tax increases nearing approval would push the amount by which Marylanders' annual tax burden has grown under O'Malley past $2 billion.

Republican senators decided not to mount a filibuster, so Senate President Thomas V. Mike Miller was not forced to round up the 29 votes required to cut off debate.

Pipkin said a filibuster would not have had much effect in a special session, because there are no bills waiting in line behind the measure on the floor.

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