The official haggling began late Sunday afternoon as the Maryland General Assembly worked feverishly to complete work on bills creating tax increases, budget cuts and slot machine gambling.
They hoped to finish late in the night or early this morning.
The House completed a key part of Gov. Martin O?Malley?s package at 1:40 a.m. Sunday, getting the bare minimum 71 votes to pass legislation spelling out how slot machine gambling would operate. The legislation also detailed how the $650 million slots would eventually bring in to state coffers would be split up.
Five senators and five delegates sat around a conference table surrounded by staff, governor?s aides, reporters and a smattering of lobbyists, as they negotiated about 30 items on which they differed.
Sales tax: Both the House and Senate had already agreed to raise the sales tax from 5 percent to 6 percent, and that action would raise almost $700 million, the largest item in the O?Malley package. But the Senate had broadened the tax to include computer services, raking in another $200 million. The House had stripped out that provision.
“Expanding the sales tax to services was a tough sell for us,” said House Majority Leader Kumar Barve, D-Montgomery. But Barve said, “I?m glad it?s narrowed down” to a more limited number of services, a concession the Senate offered, and “I?m glad telecom is out.” Cable and telecommunications interests had lobbied heavily against paying or charging the tax.
With other concessions reducing tax increases, computer services was an attractive pot of money to hold onto. “We feel a little trapped,” said Del. Sheila Hixson, House Ways and Means chair. The House reluctantly agreed to include the service, but for only five years, meaning the issue would have to be revisited in 2012.
Income tax: Sen. Ulysses Currie, D-Prince George?s, chairman of the Budget and Taxation Committee, said there was “no flexibility” on setting the top rate at 5.5 percent on those with taxable income over $500,000. “The bill only passed with 24 votes,” noted Sen. Richard Madaleno, D-Montgomery, the minimum number. The senators felt they couldn?t pass a higher rate.
They did agree to put a new 5.25 percent rate on singles making over $150,000 and couples over $200,000. And the Senate conferees accepted the House plan to raise personal exemptions by $800 for those making $100,000 (single) or $150,000 (couples), a $130 million tax cut. “It does buy more progressivity,” Madaleno said.
Overall, the income tax increases raise $197 million.
Corporate: O?Malley had proposed raising the corporate income tax from 7 percent to 8 percent; the Senate agreed, but the House pushed it to 8.75 percent. The Senate conferees agreed to go up to 8.25 percent.
The House agreed to eliminate the tax most favored by liberal groups ? combined reporting for corporations, as the governor had proposed. Instead, they accepted the Senate provision to launch a major study of combined reporting and other new corporate taxes.
