Would shift half of teacher pension costs to counties next year

ANNAPOLIS -- Maryland Senate leaders offered a budget compromise on Thursday that eliminates income tax increases on the state's lowest-earning residents but raises taxes even further on those making more than $100,000 annually.

Delegates were initially pleased by the Senate's offering, which would raise income taxes on residents earning more than $300,000 a half-percentage point to 5.75 percent.

The new income tax plan
Salary rangeCurrent tax rateSenate compromise tax rate 
$300,001- $500,0005.25%5.75%

Taxes would be increased more than the Senate had initially proposed for residents earning between $100,000 and $300,000 to offset the reduction in revenues from cutting the proposed increases for residents earning less than $100,000, according to Sen. Edward Kasemeyer, D-Baltimore.

The Senate's initial proposal raised taxes on all Marylanders earning more than $3,000, a measure Del. Kumar Barve, D-Montgomery, said was a nonstarter in the House.

The plan would reduce exemptions for taxpayers earning less than $100,000 by $200 and would eliminate them completely for residents earning more than $150,000.

The House would be willing to consider further income tax increases -- such as an unprecedented half-millionaire's flat tax, or perhaps a millionaire's tax -- to balance the budget to avoid cutting exemptions, Barve said.

The budget initially approved by the Senate included the flat tax, a 5.75 percent levy on every dollar earned by Maryland's wealthiest residents, which would raise roughly $30 million in fiscal 2013. But it was not included in the compromise plan.

Barve called the new Senate proposal "a very good-faith effort."

"The super-bracket that the Senate proposed, we'd be willing to take if it had to come to that," Barve said. "We're not crazy about it, but we'd willing to take that. On the other hand, if the Senate was willing to accept a millionaire's tax surcharge for a temporary time, we'd be willing to do that as well."

The Senate compromise raises $309.2 million in new state revenue -- roughly $200 million less than its original proposal, but millions of dollars more than the House's plan.

If lawmakers agree to shift $136.6 million in teacher pension costs to the counties next year, as the House has proposed, Maryland would have a $156.3 million budget surplus for fiscal 2013, according to the Department of Legislative Services.

Lawmakers still would have to decide how many years the teacher pension shift should take. The Senate's plan would phase in the shift over four

years, while the House wants the process to take three years ?-- with half of the cost moving in the first year.

Lawmakers would have the next year to hash out a compromise on the shift, though Barve said he prefers an agreement be reached this session.

"Our plan just gets us to where we all want to be one year more quickly," said Del. Melony Griffith, D-Prince George's.