Increasing taxes on the very rich is no more popular in Montgomery County than the much-maligned plan to tax the computer services industry, local leaders said Monday.
Last fall, Gov. Martin O’Malley suggested raising the income tax rate for the state’s wealthiest residents from 4.75 percent to 6.5 percent to solve a roughly $1.7 billion budget deficit. After Montgomery County Executive Ike Leggett warned the extent of the increases could hurt his county, “the economic engine of the state,” legislators settled on raising the tax rate to 5.5 percent for people making more than $500,00 and 5.25 percent for those who make more than $150,000. Now, four months later, a plan to raise the maximum state income tax rate to 6.25 percent for incomes over $1 million has county leaders experiencing deja vu.
The so-called millionaire’s tax would raise about $100 million for the state, but Montgomery Council President Mike Knapp said Monday that residents of Montgomery, where about half of the state’s millionaires live, would pay half of that. “We’re right back to the kind of arguments we were at before,” Knapp said. “They seem to be trying to find lots of ways to get more money out of Montgomery County.”
Local leaders have spoken out against the legislature’s decision to extend the sales tax to the computer services industry, but a letter from Knapp and Leggett to Montgomery legislators in early March warned against “replacing one marginal public policy decision with another” when a Montgomery senator proposed increasing income taxes even more for high-income earners.
GiGi Godwin, president and chief executive officer of the Montgomery County Chamber of Commerce, said 42 percent of Maryland taxpayers who would be subject to the millionaire’s tax are small-business owners who file their business taxes as individuals.
Knapp and Leggett suggested increasing the gas tax to make up the $200 million in lost revenue if the legislature repeals the sales tax on computer services.
