Pressure is mounting on Maryland Gov. Martin O’Malley and the General Assembly to raise taxes on the rich as lawmakers prepare to close a budget shortfall of at least $1 billion for the fourth straight year.
Joining the national call for wealthy Americans to pay more in taxes, union members are urging Maryland lawmakers to help plug the state’s $1.1 billion budget shortfall in fiscal 2013 by reinstating the so-called millionaire’s tax, a surcharge that O’Malley initiated in 2008 on the state’s wealthiest residents.
The surcharge, which sunset in 2010, raised income tax rates by 14 percent on residents whose annual net taxable income exceeded $1 million.
| Maryland’s millionaires by the numbers | ||
| • Maryland’s curent tax on residents earning more than $1 million: 5.5 percent | ||
| • Maryland’s millionaire’s tax, in effect from 2008 to 2010, on residents earning more than $1 million: 6.25 percent | ||
| • Millionaire tax filings between 2007 and 2009 | ||
| • Pre-recession filings: 6,899 | ||
| • Lowest millionaire filings: 4,549 | ||
| • Percentage drop: 34 | ||
| Source: Office of Gov. Martin O’Malley | ||
“There’s no fat left [in Maryland government] anymore — they have cut through the gristle and down to the bone,” said Sue Esty, assistant director for the American Federation of State, County and Municipal Employees in Maryland, which held a rally in Annapolis on the opening day of the General Assembly in support of the tax. “The millionaire’s tax would help guarantee that government can provide the services that are so desperately needed at this time.”
Maryland has the highest share of millionaires in the nation, according to a recent study by Phoenix Marketing International, with more than 7 percent of households having liquid assets of more than $1 million.
Republican lawmakers, as well as some state economists, balk at the idea of bringing back the tax. One year after it was implemented, the number of millionaires filing tax returns in Maryland plunged, leading economists to conclude that thousands of millionaires were fleeing the state as a result.
“Millionaires are very mobile, and they will move elsewhere if taxes get prohibitive,” said Scott Drenkard, an analyst with the nonprofit Tax Foundation.
O’Malley defends the tax, saying the loss of millionaires was caused by the recession, not the surcharge.
“The facts I’ve seen, the reports I’ve reviewed, indicates there’s no correlation between the changes we put in place for the progressive income tax and number of millionaires,” O’Malley said at a jobs symposium in December.
After the symposium, O’Malley’s chief of staff, Matt Gallagher, posted a blog with charts and graphs on the two most recent recessions.
The number of people reporting an income of more than $1 million dropped by more than one-third between 2007 and 2009, and by more than one quarter between 2000 and 2002, according to Gallagher’s data.
Some Republican lawmakers say they expect O’Malley to try and resurrect the tax this year.
“There’s not a tax this guy doesn’t love,” said Republican Anthony O’Donnell, minority leader of the House of Delegates.
Ahead of submitting his fiscal 2013 budget plan to lawmakers on Wednesday, O’Malley has suggested increasing the state’s 6 percent sales tax by one percentage point, as well as raising taxes on gasoline and sewer bills.
O’Donnell noted that O’Malley, as chairman of the Democratic Governors Association, also has been an outspoken proponent of President Obama’s proposal to end the federal tax break on the nation’s top income earners.
“[Republicans’] worship at the altar of tax cuts for the wealthy is unbecoming to the vast majority of hardworking families that want a better future for their kids,” O’Malley said in September. “Their party is directly responsible for a great deal of damage to our economy because of their policies and they cannot run away from that.”
