Democratic lawmakers in Maryland are attempting to resurrect the 2008 millionaire's tax as legislative support wanes for Gov. Martin O'Malley's $311 million package of tax increases.
More than two dozen Democrats are cosponsoring bills in the state Senate and House of Delegates that would increase state income taxes by 14 percent on the approximately 4,000 residents whose annual net taxable income exceeds $1 million. The bills are scheduled for hearings in the House and Senate on Tuesday and Wednesday.
"I've always believed that the people who are more able to pay more -- millionaires and higher -- should be contributing more in taxes," said Sen. Paul Pinsky, D-Prince George's County, who is cosponsoring the Senate bill with Sen. Verna Jones-Rodwell, D-Baltimore.
Maryland residents are familiar with the millionaire's tax, which would generate roughly $75 million in its first year. The General Assembly implemented the same surcharge on Maryland's top income earners in 2008 and let it expire in December 2010, following reports that it drove millionaires out of the state. Republican lawmakers, as well as some state economists, balk at the idea of bringing back the surcharge.
"The millionaire's tax has got to be one of the dumbest things they have ever thought of proposing," said Dee Hodges, president of the Maryland Taxpayers Association, which lobbies against new taxes. "I can't imagine why they would try to bring this tax back."
Some Democrats say the tax is a better alternative to O'Malley's 2013 budget proposal, which would hit one in five Marylanders with higher taxes to help close a $1 billion budget gap.
O'Malley's proposal would raise an estimated $182 million by capping deductions -- such as those on mortgage interest and charitable contributions -- at 90 percent for residents who earn more than $100,000 annually and at 80 percent for those who earn more than $200,000. Exemptions would be eliminated for singles earning more than $125,000 and couples earning more than $175,000.
Democratic leaders in the Maryland House and Senate have said they are uncomfortable with reaching so far down into the income bracket levels.
"I think already, the discussion in the [Senate] Budget and Taxation [Committee] and around the legislature has been a shift away from the plan the governor proposed," Pinsky said. "Instead of using exemptions and deductions there have been thoughts of raising the income tax rate for all levels.
But we would like to make it a little more progressive and would like to see the upper rate higher."
Maryland has the highest share of millionaires in the nation, according to a recent study by Phoenix Marketing International, with more than 7 percent of households having liquid assets of more than $1 million.