Bipartisan Tax Relief Measures Proposed in Maryland

Both parties have members supporting a move to cut tax rates and raise estate tax exemption levels to keep businesses and money in Maryland.

Maryland legislators from both parties have proposed tax cuts in this session. File|Patch
Maryland legislators from both parties have proposed tax cuts in this session. File|Patch


Capital News Service

Maryland residents could see relief from the state income, sales and estate taxes as the General Assembly tackles measures that propose lower tax rates and raise estate tax exemption thresholds.

State lawmakers are facing a largely bipartisan effort to lower some of these taxes in order to keep Maryland’s residents, businesses and money in Maryland. But Gov. Martin O’Malley, who ultimately must sign any approved cuts into law, did not propose any sweeping tax changes in his annual budget.

While the House Republican Caucus is making a push to lower taxes during the 2014 session, the overall effort to decrease income and sales tax rates has received support from both sides of the aisle, with significant Democratic support to raise the estate tax threshold.

“I don't think it's a matter of Democrats and Republicans,” said Delegate Frank Turner, D-Howard, who co-sponsors several tax bills. “All bills have a chance. We're going to sit back and we're going to discuss it, and … we're going to see what is in the best interest of the state.”

One measure, before the House Ways and Means Committee, is the Republican-sponsored Income Tax Relief Act of 2014, which would gradually reduce the state’s personal income tax by 10 percent over three years.

Primary bill sponsor Delegate Andrew Serafini, R-Washington, recently told the committee that reducing the personal income tax would make things better for Maryland families, small businesses and the economy.

Serafini’s testimony — which saw little testimony in opposition — centered around the idea that decreasing taxes allows residents to keep the money they earn, increases consumption, drives the economy and leads to more state revenue.

“We want consumption,” he said. “That’s what drives our economy for everybody.”

The committee also heard bipartisan legislation that proposes a flat 3.5 percent income tax rate to everyone whose annual income exceeds $30,000. If passed, Maryland would join the other eight states that have a flat income tax rate, ousting the current law which follows an eight-bracket system that taxes residents between 2 percent and 5.75 percent based on income.

Serafini, who is also this bill’s primary sponsor, told the committee the legislation was proposed to make income tax simple, transparent, fair, efficient and stable.

In addition to measures that would change personal tax rates, legislators are also examining the state’s corporate tax structure.

Since the end of January, the Ways and Means and Senate Budget and Taxation committees have reviewed a total of six bills — three proposed in both chambers and an additional three in the House — that propose to lower the corporate income tax rate, which currently stands at 8.25 percent, to rates varying between 4 percent and 7 percent.

Serafini, who sponsored legislation to reduce the corporate income tax rate to 4 percent, said that the state’s corporate income tax is relatively unlucrative, raising $872 million a year, which represents only 3.2 percent of Maryland’s total tax revenues. But as the 14th-highest corporate income tax rate in the country, the tax makes Maryland far less competitive in the business market, he said.

Ben Wilterdink, a research analyst for the Center for State Fiscal Reform at the American Legislative Exchange Council, followed Serafini’s testimony in support of the bill: “[The corporate income tax] burden is passed on to the consumer, to the shareholder and even to employees who have to work for lower wages than they otherwise would be. A recent Treasury Department study even found that the laborer bears at least 40 percent of the corporate income tax in the form of lower wages.”

Republicans in both the House and Senate would also like to roll back the sales tax from 6 percent to 5 percent, to its pre-2007 level.

In contrast to the numerous legislation that boast application to all residents, both committees have also heard bills regarding estate and inheritance taxes, which only apply to the state’s millionaires.

In the first week of February, the Senate and House committees heard several bills that propose to raise the state’s current $1 million threshold at which the estate tax applies. Both committees are also set to simultaneously hear Democrat-dominated bills on March 5, which are backed by Senate President Thomas V. “Mike” Miller, Jr. and House Speaker Michael E. Busch, that would gradually raise the state’s estate tax exemption rate to match the Federal level of $5.34 million over four years. 

Ways and Means has also seen one bill to repeal both the estate and inheritance taxes, while a similar bill to repeal only the inheritance tax has also circulated through Budget and Taxation.

Delegate Susan Krebs, R-Carroll, who is the primary sponsor of one bill that proposes to set the estate tax exemption to the federal level, and another that advocates for the repeal of estate and inheritance taxes, said there is a vast amount of wealth leaving Maryland as people move to states with lower tax burdens.

“[The legislation] would make Maryland more competitive with the rest of the country. We are suffering from tax flight. Millions of dollars lost every year as wealthy residents are leaving Maryland,” Krebs said. “I believe it would encourage our millionaires and retirees to stay around rather than to relocate to more tax-friendly states.”

Find a chart of tax proposals at: http://cnsmaryland.org/interactives/tax-chart-2014.html.

patricia February 28, 2014 at 08:02 AM
How very strange, all of a sudden the liberal progressive democrats in the state of Maryland want to "CUT" taxes? The liberal progressive democrats who helped O'Malley raise ALL of these taxes and fees, are now saying they want to cut some of them back? Could it be the liberal progressive TAX and SPEND isn't working like they said it would?
jag February 28, 2014 at 12:59 PM
...what isn't working in MD? Our above-average growth? Our relatively low unemployment? Our #1 schools? Our high-paying jobs? The taxes needed to balance budgets (something Conservatives-in-name-only hate to do, I know) during the Great Recession can now be rolled back in part thanks to said growth and wealth. It takes a real troll to find fault in any of this.
patricia February 28, 2014 at 09:42 PM
All liberal progressive talking points, and that's all they are,are talking points. A lot of people in Maryland are suffering right now, just go to one of the emergency outreach locations, or is that beneath you. When the liberal progressive democrats in Maryland balance the budget, they just raid the transportation fund. Taking money out of one pocket and transferring into the other is not balancing a budget. They just want to make it look like they're cutting taxes to get they next liberal progressive democrat in the governors mansion, then they can raise'em all back UP UP UP. The sad part is the fact that so many low information voters fall for it over and over and over again. They're afraid someone like you will call them names and pick on them.
jag February 28, 2014 at 10:38 PM
The person non-ironically complaining about "liberal progressive TAX and SPEND" policies says I'M the one with talking points. Yeah, okay. That makes a lot of sense, as does the claim this is some sort of bipartisan conspiracy to help democrats win the governorship (as if it isn't already a foregone conclusion that a D will win). You whine year after year after year after year about how tax rates went up to help balance the budget during the Great Recession and then you whine now that both sides are trying to work on how to go about lowering taxes. It's people like you that are nothing but a poison to the policy process.


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