Democratic House leaders unveiled a $1.2 billion plan Friday to tax repair services from cars to carpet, double the state?s hotel tax, and create new, more progressive income tax brackets.
The package approved by a House committee is a dramatic departure from the plan adopted in the Maryland Senate, which includes taxes on computer services and video game arcades. The House?s package sets three new income tax brackets ranging from 5.25 percent to 5.75 percent and increases personal exemptions for lower- and middle-class households.
“This bill, unlike the Senate bill, actually makes the tax code more progressive,” said Del. Kumar Barve, the majority leader and chairman of the House?s revenue subcommittee.
“This is not an onerous tax, even on the wealthy,” he said later.
Barve faced resistance from the committee?s Republicans on extending the state?s sales tax, increased from 5 percent to 6 percent, to repair services such as cars, jewelry, appliances and plumbing. He estimated the expansion could net at least $120 million each year.
Several opponents said the increase could force some repair businesses out of state and disproportionately burdens the state?s working class. They successfully lobbied to remove “maintenance” services from the legislation, but failed to exempt auto-repair services.
“This is absolutely unfair,” said Del. J.B. Jennings, a Baltimore County Republican. “You?re hitting the little guy with this.”
The House also is looking at plans to increase the corporate income tax from 7 percent to 8.75 percent and resurrecting an earlier proposal known as combined reporting to remove “loopholes” that enable some corporations to avoid paying state income taxes.
Both chambers have made significant changes to the package endorsed by Gov. Martin O?Malley to close the state?s $1.5 billion deficit, eliminating a property tax cut, gas tax increases and a $50 sales tax credit for the state?s poorest.
The Senate voted on language to study combined reporting and voted to increase the corporate income tax to 8 percent.
Del. James Mathias, an Eastern Shore Democrat, said he was receiving calls from hotel and motel owners in Ocean City expressing “credible concern” about the proposed hotel tax increase. Mathias said details of the plan are unclear.
“I?m asking them to be calm,” Mathias said. “Take a deep breath. We?ll make sense of this to the best of our ability.”
