Senate votes to increase state income tax as debate gets personal
The Senate approved the state’s entire $35 billion budget package and reforms to maintenance of effort on Thursday as the spending plan cleared its first major hurdle before heading to the House of Delegates for further tweaking.
Included in the Senate package is a plan to raise the state income tax across the board for almost every Marylander. An amendment adopted to the plan Wednesday night that adds to that increase for the state’s top earners dominated much of the debate.
The original bill, sponsored by Sen. Roger Manno, D-Montgomery, repeals a 1997 tax cut and raises the state income tax rates for anyone making more than $3,000 a year by .25%. However, a committee amendment adopted on Wednesday imposed what Sen. David Brinkley, R-Frederick, called a “half-millionaire’s tax” by further increasing the tax rate on anyone making more than $500,000 a year from a proposed 5.5% to 5.75%. The increase would affect around 19,000 households and net an additional $30 million in revenue designated for restoring old schools.
Republicans argued that when adding local county taxes, those making more than $500,000 a year could be taxed at a combined rate totaling 8.95%, which would push job creators from the state.
High-earners pay $89,000 in income tax
According to figures from the comptroller’s office (p. 13), these 19,000 households with taxable income of over $500,000 pay an average of $89,000 in state and local income taxes now — $58,000 state, $31,000 local. About 4,000 of them make $1 million a year.
By comparison, these well-to-do taxpayers pay more in state and local income taxes than the 1.7 million Maryland taxpayers who have incomes of less than $60,000.
Senate Minority Leader E.J. Pipkin warned the chamber that they were “walking into a marketing nightmare” as news of the tax spreads. Pipkin said by creating the highest tax rate in the nation, Maryland would have a tough time attracting businesses and their owners to the state.
It was a sentiment echoed by Republican lawmakers and some Democrats as debate took an ugly turn.
Sen. Bobby Zirkin, D-Baltimore County, said he was “ashamed” of the adopted amendment. Invoking the Occupy Wall Street Movement, Zirkin said that the legislature should not target a specific class of people.
“There are reasons people are angry,” responded Sen. Paul Pinksy. “The 1% has grown out of touch.”
Defending the proposal, Pinsky argued that when public services are cut it is not the top 1% of income earners who are most affected. The Prince George’s County Democrat reminded lawmakers that the tax would only apply to income after federal deductions.
“Karl Marx would be proud,” Brinkley said in response to Pinsky’s comments. Brinkley’s comment drew moans from some in the chamber and a chiding from Senate President Mike Miller.
Later in the session, Brinkley apologized for offending Pinsky, who said it was not the first time he had been “red baited,” but defended his remarks.
“When we get into a conversation about class warfare and some of the policies that are now being advocated here, that’s exactly what it smells like,” Brinkley said.
Tax on Internet sales
The income tax bill passed 26-20, with 8 Democrats voting against the measure. The Senate also approved the “Amazon tax,” which would levy the state’s sales tax against some online purchases, and a 70% tax increase on most cigars.
Also part of the Senate’s budget package was a bill reforming maintenance of effort, which ensures stable funding at the local level for public schools. The adopted bill closes several loopholes that some local governments have been accused of exploiting to avoid fully funding schools in their jurisdictions.
Speaking after the Senate adjourned, Miller said that while many Democratic lawmakers did not agree with the additional tax increase, they wanted to deal with the state’s $1 billion structural deficit.
“If you’ve made a success of your life, and you think money is success, we have an obligation to do our part for everyone,” Miller said.
Miller added that he thought comments about the Occupy Wall Street Movement were “ridiculous” and did not belong in the Senate debate.
The budget package now moves to the House, where the Appropriations Committee will make decisions on its version of the budget Friday.