ANNAPOLIS - A Montgomery County lawmaker has introduced legislation that would impose a special state tax on Maryland residents' capital gains.
The proposed taxes would have a heavy impact on small businesses and counties such as Montgomery, Howard and other jurisdictions with some of the highest incomes in the country.
The legislation, introduced by Democratic Del. Ana Sol Gutierrez and a host of lawmakers from Prince George's County and Baltimore, would charge an additional 2 percent tax on capital gains -- profits on the sale of stocks, bonds and real estate investments -- filed as a part of residents' taxable income.
For Maryland's highest-earning residents currently paying a 5.5 percent income tax rate on capital gains as well as income taxes -- part of the so-called "1 percent" Gutierrez said the bill targets -- the increase to 7.5 percent would raise taxes on investments by roughly 36 percent.
Small businesses with net capital gains also would see an increase in their income tax liabilities, according to state officials.
Gutierrez's bill would have the greatest hit in her own county, as well as Howard, Calvert, St. Mary's and Charles counties, all of which are ranked among the 15 richest counties in the country, according to the website Main Street, which compiled its list using 2010 census data.
"You're adding 2 percent just for the privilege of having invested in another company. So your tax rate goes up for doing the American thing and investing in another company," said Dee Hodges, president of the Maryland Taxpayers Association, which lobbies against new taxes.
"It's just another way of the state reaching into our pockets without doing anything for taxpayers," she said.
The capital gains tax would generate at least $211 million in revenue for the state in fiscal 2013 after taking effect in July, according to the state Department of Legislative Services -- far more than the $75 million that would be raised by the proposed millionaire's tax.
Maryland has the highest concentration of millionaires in the country -- 7.22 percent of the state's households, according to a Phoenix Marketing International report.
Gutierrez said her tax proposal was a fairer approach than Gov. Martin O'Malley's proposal to raise income taxes on earners making more than $100,000, a move a state budget analysis found would add an average of $334 more in taxes annually to 32 percent of Montgomery County taxpayers.
Montgomery County officials have derided the governor's tax plans and other tax increases for placing too much burden on its residents while the county has little to show for the tax dollars it provides the state.
"Montgomery County is the economic engine of the state of Maryland," said County Council President Roger Berliner. "It is my hope that the state will recognize that. ... We need a vibrant county and the rest of the state needs our county to remain vibrant."