ANNAPOLIS — Maryland lawmakers are trying to resurrect the state’s millionaire’s tax, saying the levy is a better way to raise new revenue than Gov. Martin O’Malley’s proposed income tax increases.
The 6.25 percent tax, which would affect about 4,000 residents with net taxable incomes exceeding $1 million, has gained traction as an alternative to O’Malley’s income tax proposal, which would affect 22 percent of Marylanders, or 482,401 tax returns.
The governor’s proposal to limit itemized deductions and reduce personal exemptions on income taxes for residents earning more than $100,000 would generate $196.1 million in fiscal 2013, and an average of $130 million annually in the following years, according to an analysis by the Office of Legislative Services.
A millionaire’s tax would generate $146.4 million in revenue in its first year without taxing as many Maryland residents, legislative analysts found. In subsequent years, the tax would generate more money than O’Malley’s plan.
Roughly one-fifth of the total revenue from the millionaire’s tax would be paid by nonresident returns, an analysis found.
About 85 percent of the taxes from Maryland residents would come from four counties — Montgomery would bear the bulk of the tax, about 47 percent, and Baltimore, Anne Arundel and Howard counties also would be hit.
So would small business that generate more than $1 million for any one owner or business partner, the analysis found.
Del. Mark Fisher, D-Calvert County, said bringing back the millionaire’s tax would have the same effect as it did when enacted in 2008 until it expired in 2010 — driving away some of the state’s highest-earning taxpayers.
“Aren’t we kind of telling them to take their money and go somewhere else to invest it?” he said.
Neil Bergsman, director of the Maryland Budget and Tax Policy Institute, disputed reports that the tax drove millionaires out of the state.
The House bill’s chief sponsor, Del. Jolene Ivey, introduced an amendment that would eliminate the millionaire’s tax in favor of broader tax increases that she says better target the upper-middle class.
Residents earning more than $300,000 would have their income tax rate raised from 5.25 percent to 5.75 percent, while anyone earning more than $500,000 would pay 6 percent, up from the 5.5 percent they now pay.
