ANNAPOLIS -- Maryland lawmakers, deadlocked on critical issues over how to increase state taxes to fill a budget gap and whether to expand casino gambling, asked Gov. Martin O'Malley just before midnight last night to extend the legislative session.
State Senate President Thomas V. Mike Miller Jr. called for the special session just before midnight Monday. The governor did not immediately respond to the request.
About an hour before midnight it appeared lawmakers had reached a budget deal that would raise income taxes for all Marylanders earning more than $100,000 but spare a majority of residents from any income tax hikes or loss of exemptions. But the general assembly did not take final action on that measure before the session was extended.
Under the tentative deal, tax rates would rise to 5.75 percent for residents earning more than $250,000. Anyone making between $100,000 and $250,000 would have their tax rates increased to between 5 percent and 5.5 percent.
House and Senate budget leaders were stuck for days over reductions to income tax exemptions -- while delegates agreed to eliminate exemptions for single residents earning more than $150,000 annually and to reduce exemptions for those earning more than $100,000, they refused to budge in their opposition to a $200 reduction in exemptions over three years for residents earning less than $100,000.
Meanwhile, negotiations between the House and Senate became snarled over a gambling measure to allow a referendum on a sixth Maryland casino, to be located in Prince George's County.
Shortly after a compromise on gambling was reached, lawmakers proposed $120 million in spending cuts over the next two years.
"If the conferees believe we need to be part of the solution to get us all off the dime and to drive one another toward a meeting place in the middle, we're certainly [prepared to] do our part and do even more than we did at the outset of the session," Gov. Martin O'Malley said Monday.
It's not clear where those millions of dollars in cuts will come from, the governor said.
The House and Senate had yet to take votes on the full package of budget bills shortly before midnight Monday.
While protecting roughly 90 percent of Maryland households, the budget deal also avoids a proposed flat tax -- also known as the half-millionaire's tax -- on residents earning more than $500,000 annually.
A millionaire's tax floated by some lawmakers from both chambers was also left out of the deal.
The new income tax brackets would raise roughly $250 million in revenue, not nearly as much as plans originally proposed by senators, whose taxes would have collected more than $400 million in levies from Marylanders.
Lawmakers had already come to terms on a four-year plan to shift half of the Maryland's teacher pension costs to local jurisdictions, a move that saves the state $136.6 million in fiscal 2013.