For weeks, a chief componentof Gov. Martin O?Malley?s sales pitch for his tax package was that 83 percent of Marylanders would pay less under his plan to raise some taxes, and provide a little relief on others.
That wasn?t entirely true to begin with ? if you added on all the taxes. But Wednesday, the governor had to concede that was no longer true “under what the Senate has done so far.”
The Senate Budget and Taxation Committee took out major parts of O?Malley?s tax relief Tuesday. The 3-cent cut in the property tax is gone; the $50 sales tax rebate for low-income people is out; the lower income tax rates at the bottom of the scale are gone.
In voting for $1.5 billion in new taxes ? the largest single tax increase in Maryland history ? the committee also cut top income tax rates on the wealthiest 5 percent of taxpayers. Most people will wind up paying more if their paychecks continue to go up, as everyone hopes and expects.
The committee also added $300 million in new taxes on computer services and landscaping. These taxes had not been proposed before, they never had a hearing, and business lobbyists are scrambling to figure out how to kill this sneak attack.
How much more will typical families pay? That?s always difficult to determine. But legislative analysts estimated the effect on four households. A family with $40,000 in household income would pay $87 more. At $75,000, a family would pay $166 more. At $150,000, it would pay $332 more. And those earning $750,000 a year would pay $2,253 more.
But O?Malley points out that the process is hardly over. The Senate has only begun work on the bills, and the House still has to act.
“They were reluctant to put in place any tax relief unless they were assured that there would be funding from slots,” O?Malley said. “There is still the opportunity to make this more fair moving forward,” even in future years.
“We take it one day at a time,” O?Malley said. “All of us have difficulty with aspects of this package. None of this was proposed because we thought it would be overwhelmingly popular.”
Senate President Thomas Mike Miller still must round up 24 votes to pass it on the Senate floor today, 29 for the slots referendum.
“We?ll see how it goes [today],” Miller said. “That?s a big, big if.”
Senate tax package
Here are some of the changes:
» 1. Raise sales tax from 5 to 6 percent: $687 million. Half goes to transportation.
» 2. Put sales tax on computer services, landscaping and video arcades: $300 million.
» 3. Raise personal income tax to 5 percent on single people with taxable incomes over $150,000 and couples over $200,000, and top rate on those with incomes over $500,000 to 5.5 percent. No reduction in rates for taxpayers making less than $150,000 per year. Raises $187 million.
» 4. Doubles cigarette sales tax to $2 a pack: $164 million.
» 5. Increases corporate income tax from 7 to 8 percent: $112 million, half to transportation.
» 6. Increase vehicle titling tax from 5 to 6 percent, but exempts value of trade-in: $80 million to transportation.
» 7. Drops indexing of gasoline tax.
