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Maryland lawmakers poised to approve retroactive tax hike

By , and Greg Masters,

Tax Day may be a week away, but if you live in Maryland, you’d be wise to begin planning for what you’ll owe next April.

Maryland lawmakers, facing a Monday deadline to adjourn and a $1 billion budget gap to close, settled Saturday on the largest pieces of a tax package that would apply retroactively.

If you make at least six figures — or with a spouse earn a combined $150,000 or more — the taxes being taken from your paychecks this year wouldn’t be enough to cover the bill you’d see in 2013.

Budget negotiators, however, appeared unlikely to decide until Monday on a Senate measure that could increase the taxes paid by almost every Marylander. Lawmakers left Annapolis late Saturday without agreeing on whether to reduce by $200 the annual personal deduction that can be claimed for each taxpayer and dependent and to phase out the benefit for high-income earners.

Also left unresolved Saturday was a decision over a measure that could amount to the largest expansion of gambling in the state since slots were legalized in 2007.

The package of tax increases and a plan lawmakers advanced Saturday to shift a share of teacher pension costs to counties are expected to plug nearly half of the state’s budget shortfall.

Depressed tax revenues since the recession and decisions by Maryland’s Democratic leaders to continue record spending on education and health care for the poor have contributed to a projected gap of nearly $1 billion annually for the remainder of the decade.

Gov. Martin O’Malley (D) and the General Assembly set out to fix half the problem this year, and it has proved no easy task. Lawmakers largely jettisoned O’Malley’s tax plan but are still finalizing their own. For the first time in five years, the assembly will head into the last day of its session, on Monday, with no final answers on the year’s spending plan.

Under the compromise between the House and Senate, the state’s tax rate on singles making at least $100,000 and couples earning at least $150,000 would jump to 5 percent from 4.75 percent. With local add-ons, the combined state-local rate would increase to 8.2 percent.

The rates would inch up thereafter, tying the District for the fourth-highest nationwide at a combined top rate of 8.95 percent for singles earning above $250,000 and couples making $300,000. Under previous proposals, the percentage increase would have been larger for those making $100,000 than those making a million or more.

The lengthy debate expected on the budget Monday threatens to crowd out decisions on hundreds of other bills. And some lawmakers said they were also concerned that the budget could be caught up in the emotional debate over bringing a casino to Prince George’s County and push both matters beyond the scheduled end of the session on Monday.

The House took no action Saturday on legislation that would authorize a full-fledged casino in Prince George’s, perhaps at National Harbor. The Senate, meanwhile, lapped the lower house on the issue: Senators crafted and approved, by a vote of 37 to 9, a new bill intended as a compromise.

That plan would invite bids for a casino in a western swath of Prince George’s that includes National Harbor and Rosecroft Raceway, pending approval by voters statewide in November.

A new provision would prevent the casino from offering slot-machine gambling before July 2015 in order to give all of the state’s five previously authorized venues a chance to get up and running.

The bill would also authorize Las Vegas-style table games at all six Maryland gambling sites.

Unlike a bill that passed the Senate last month, the new bill leaves many operational details to be worked out when the legislature returns next year.

Senate President Thomas V. Mike Miller Jr. (D-Calvert) said that the revised bill was an attempt to offer other casinos a “competitive advantage” but that also allows for the possibility of a high-end venue in Prince George’s, as County Executive Rushern L. Baker III (D) has advocated.

“We don’t deserve a second-class facility,” said Miller, whose legislative district includes part of Prince George’s.

It was unclear whether the House would be more receptive to the second Senate bill.

“It looks a lot like the bill they sent over already,” said House Majority Leader Kumar P. Barve (D-Montgomery).

On Friday, House leaders floated an alternative that would allow only table games at National Harbor, the 300-acre, mixed-use development on the Potomac River. Some lawmakers from Prince George’s have argued that slots prey upon the poor more than table games.

The new Senate bill would allow up to 3,750 slot machines at a Prince George’s casino, down from 4,750 in the previous bill.

Among the decisions the new bill leaves until next year: how much revenue casino owners may keep from table games and whether to increase the 33 percent share of slots proceeds allowed under current law.

The new Senate bill advanced Saturday over the objections of Sen. C. Anthony Muse (D-Prince George’s), who represents the area where a venue would be located. He objected to the hurried process.

“I don’t realize why persons from other counties should be in such a rush to push something on Prince George’s County,” he said.

The senator was also one of a handful of key lawmakers Saturday who said they would not vote for O’Malley’s proposal to subsidize development of an offshore wind farm.

O’Malley and grass-roots environmental groups have tried for two years to persuade the legislature to pass a wind bill. No commercial offshore wind development has succeeded on the Atlantic Coast.

The governor scaled back his proposal this year to convince lawmakers that the cost to ratepayers would be little more than $1.50 per month. But as of Saturday night, the bill’s prospects looked doubtful. Three Democrats had joined Republicans on the Senate Finance Committee in saying that they remained skeptical of the bill.

“The governor has some work to do,” Miller told reporters.

The Senate also significantly altered another of O’Malley’s environmental measures — a bill would double nearly every resident’s “flush tax,” used for sewage-system upgrades and other Chesapeake Bay restoration activities, to $60 from $30.

Supporters have argued that the increase is needed to cover a shortfall in bay cleanup funds. But a Western Maryland Republican successfully argued Saturday that residents who are not in the Chesapeake Bay watershed shouldn’t have to pay the increase.

Lawmakers, however, appeared on the verge of approving O’Malley’s initiative to curb sprawl by limiting developments that rely on septic systems. Slightly different versions of the bill have cleared both chambers. Each includes a compromise that will keep final land-use decisions in local hands.

In a lighter development, Marylanders will be allowed to compete for cash and prizes in fantasy sports leagues under a bill that has passed both chambers. Supporters of the legislation said state law is ambiguous on the issue of pay-to-play fantasy football and other leagues, which federal law and most states allow.

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