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State Tax Imbalance Could Sway Debate
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"In Maryland, the use of the local income tax is probably greater than everywhere else," Rohrer said. "On the one hand, that keeps the property tax side down, but it boosts the income tax component."
But Maryland has one of the most outdated personal income tax structures in the country, analysts said.
"I think the tax structure has been missing the boat in a few different ways in terms of modernization," said Iris Lav, deputy director of the Center on Budget and Policy Priorities, a nonpartisan national organization that recently studied Maryland's tax structure.
Maryland is one of six states with a flat-rate personal income tax. Using a structure that was set in 1967, it collects a 4.75 percent tax from everyone earning more than $3,000.
"There's not a lot of gradations in the rates," said Warren G. Deschenaux Jr., also of the Department of Legislative Services. "We have introduced a good level of progressivity at the bottom end through the earned income tax credit. But when you get out to the $40,000, $50,000, $60,000 range, everybody's paying basically the same rate."
Marylanders appear divided over whether the tax structure is fair, according to The Post's poll. When asked about the overall state tax system, 55 percent said it was "very fair" or "moderately fair" and 44 percent said it was "not too fair" or "not fair at all."
O'Malley has proposed the first major overhaul of the state's tax structure in four decades. "There's nothing terribly progressive about it," he said of the existing structure. "It's flat." Under his plan, the system would become more "progressive" by shifting the personal income tax burden more heavily to the state's wealthiest residents.
O'Malley is proposing two new income brackets. Single filers with taxable income between $150,000 and $500,000 and married couples with a combined taxable income between $200,000 and $500,000 would be taxed at a 6 percent rate. All filers with taxable income of $500,000 or more would be taxed at 6.5 percent.
The governor's plan also calls for lowering the rates for the first $15,000 in taxable income for single filers and the first $22,500 or joint filers, which O'Malley said would help lower-income workers.
