Maryland lawmakers are trying to resurrect a bill that would extend the so-called millionaire’s tax on the top 1 percent of the state’s earners through 2015. The surcharge, which expired in December, increases state income tax rates by 14 percent on residents whose annual net taxable income exceeds $1 million. It would generate roughly $75 million for the state in its first year.
Lawmakers rejected calls to extend the tax last year, following reports that it drove the Maryland’s top earners — and most valuable consumers — out of the state.
But education officials, public employee unions and advocates for the homeless say Maryland’s wealthiest residents should be shouldering a larger share of the state’s budget deficit.
Gov. Martin O’Malley’s fiscal 2012 budget proposal closes a $1.4 billion budget gap with a combination of cuts to government programs, funding and bond transfers, and pension reforms — including a requirement that state employees pay more for the same level of benefits.
“If we’re asking state employees to pay an extra 2 percent [into their pension plans] it’s not unfair to ask people who make an excess of a million dollars to pay a bit more as well,” said Michele Lewis, legislative director for the American Federation of State, County and Municipal Employees.
The tax equates to an increase of $11,250 — for a total of $82,500 — in personal income owed to the state by residents earning $1.5 million annually.
In 2008, the first year the tax took effect, there was a 30 percent drop in the number of million-dollar earners filing tax returns.
“We think that’s a lot better than making cuts to public schools that take away teachers,” Charlie Cooper, chairman of the nonprofit Maryland Education Coalition, told the Senate Budget and Taxation Committee.
Business representatives warned committee members that extending the tax would drive commerce outside the state.
“You can’t reject the fact that every major corporate headquarters that has left California for the Washington region has chosen Fairfax County over Montgomery County,” said Lisa Fadden, spokeswoman for the Montgomery County Chamber of Commerce.
Defense contractor Northrop Grumman and hotel giant Hiton Hotels both recently decided to move to Fairfax County.
Fadden said states’ individual income-tax rate plays a “huge role” in large corporations’ decisions to relocate.
“We’re in a very tough competition with our neighbors across the Potomac,” she said. “Breaking this promise [to sunset the millionaire’s tax] would even further hurt our ability to compete.”
