POLITICS

Report: O’Malley tax increase would cost $274 more annually

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Politics,Local,Maryland,Hayley Peterson

Governor had said residents would pay an extra $191

One of every five Marylanders would pay an average $274 in extra taxes each year under Gov. Martin O’Malley’s income tax plan, higher than the governor had estimated, according to a new report from state budget analysts.

In Montgomery County, where roughly 32 percent of taxpayers would be hit by higher levies, the average annual tax increase would reach $334 for 123,537 taxpayers, the state’s independent Department of Legislative Services reported. Montgomery residents account for one-fourth of all Marylanders affected.

Affected Prince George’s County residents would pay an average of $206 more annually. 

O’Malley’s estimates of his tax plan’s impact have been much lower. He has said an average family of four — which he estimated makes $150,000 — would pay an additional $191 annually as a result of his proposal.

What the tax plan means
 Impacted tax returnsPercent of returns impactedAnnual tax increaseAverage tax increase per affected taxpayer
State482,40122.4%$135 million$274
Montgomery County123,53731.7%$42.1 million$334
Prince George's County53,67616.2$$11.3 million$206 
Source: Maryland Department of Legislative Services

The analysts also reported lower revenue projections from the changes than O’Malley has touted.

The income tax changes would generate an estimated $130 million annually, not the $182 million that the governor has claimed, according to the Legislative Services report.

“They are very overly optimistic in their revenue projections, which then sets them up for a very bad scenario, in terms of their needs, down the road,” said Christopher B. Summers, president of the Maryland Public Policy Institute, a nonprofit think thank. “They have not addressed their overspending for decades, and eventually the check comes due. It’s caught up to them, and now they are making it more expensive to live and work in the state.”

O’Malley made the proposal to help plug a $1.1 billion budget shortfall that the state is facing in fiscal 2013. He also has proposed shifting half of teacher pension costs onto counties and adding a 6 percent sales tax to the state’s 23-cents-per-gallon gasoline tax, which would add about $400 annually to taxpayers’ gas bills if they filled their tank five times a month.

The governor’s income tax changes would cap deductions — such as those on mortgage interest and charitable contributions — at 90 percent for residents who earn more than $100,000 annually and couples earning $150,000, 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.

Half of all itemized deductions that Marylanders earning more than $100,000 claimed in 2008 were for home mortgage interest, according to the Department of Legislative Services.

Charitable contributions accounted for 20 percent of the claims, while real estate taxes accounted for 16 percent.

Democratic senators are considering an alternative to the governor’s plan that would raise income taxes for all taxpayers by 0.25 percent, according to Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s counties.

 

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Hayley Peterson

Staff writer - White House/campaign and Maryland politics
The Washington Examiner