In Maryland, the wealthy corporate executive pays the same income tax rate as the people who clean his office, a fact Gov. Martin O?Malley often bemoans.
Anyone earning $7,500 a year pays the same flat rate as the person making $750,000 per year ? a flat 7.5 percent to 8 percent depending on the local piggyback tax. That?s why Maryland income taxes are the third-highest in the country. These rates also generate almost a quarter of all state revenues.
“Maryland?s tax system puts too much of the burden on those least able to pay,” several liberal state senators told the governor in a July letter. “That policy is not fair and leaves the state exposed to recurring deficits.”
“I?m in favor of progressive taxation where people who make a lot more pay more,” O?Malley said this summer.
There seems to be general agreement “to try to see that the middle-income taxpayer can be treated a little more fairly,” said Sen. Ed Kasemeyer, D-Baltimore and Howard, majority leader and new vice chairman of the Senate Budget and Taxation Committee. That means lowering taxes at the bottom and raising them at the top. Kasemeyer said a temporary tax on high-income people might be part of the mix.
A June poll by the Alliance for Tax fairness, a liberal labor coalition, found that about two-thirds of Marylanders support a surcharge on those making $500,000 a year in taxes ? a move the group estimates would generate $410 million. Two-thirds of 500 “likely voters” also favored imposing a rate increase of 1 percent for those making $225,000 a year. That would generate an estimated $350 million.
According to the comptroller?s office, Maryland?s richest ? the 18,394 taxpayers with incomes of $500,000 and higher, less than 1 percent of the total ? pay $1.7 billion in state and local income taxes ? 20 percent of the total take. The 87,000 with incomes at $200,000 and above ? just 4 percent of taxpayers ? pay $3 billion, a third of all state and local taxes. More than a third of them live in Montgomery County.
Raising the top rates “puts Maryland in the stratosphere” of taxes, said Karen Syrilo, tax consultant for the Maryland Chamber of Commerce. “Progressivity will disproportionately hurt small-business people,” she added, because many of them make $200,000 a year, and “that does not make them rich.”
“Most of Maryland businesses are small-business owners,” Syrilo said. Of the 150,000 business operations, only 3,000 have more than 100 employees.
