Leggett Offers Alternative To O'Malley Tax Proposal

By Philip Rucker
Washington Post Staff Writer
Thursday, November 1, 2007

Montgomery County Executive Isiah Leggett will present an alternative personal income tax plan to Maryland lawmakers today that would tax the state's highest earners at a rate one percentage point lower than Gov. Martin O'Malley has proposed.

Lawmakers from Montgomery have voiced concern that O'Malley's proposal to redistribute the tax burden to Maryland's most affluent residents would affect Montgomery more than any other jurisdiction and threaten the economic interests of the state's largest and wealthiest county.

Leggett's plan is less progressive than O'Malley's but still would be an overhaul of the state tax structure, which applies a flat 4.75 percent tax to all taxable income over $3,000.

Under Leggett's alternative, single filers reporting taxable income above $500,000 and joint filers reporting a combined taxable income above $1 million would be taxed at a 5.5 percent rate. In O'Malley's plan, high-end earners would be taxed at a 6.5 percent rate. Leggett's plan would create seven brackets, compared with five under O'Malley's proposal, with tax rates starting at 2 percent, according to a draft obtained by The Washington Post.

Leggett (D) said yesterday that his proposal is flexible and that some figures could change but that the draft represents "the thrust of it." Leggett is preparing to testify this afternoon before legislators as they meet for a third day of joint committee hearings during a special session to close the state's projected $1.7 billion budget shortfall.

Under the proposal by O'Malley (D), the wealthiest residents in Montgomery would pay an almost 10 percent rate, when the county's 3.2 percent levy is factored in. This would surpass Virginia's top rate of 5.75 percent and the District's top rate of 8.5 percent, which Leggett and Montgomery lawmakers fear would put their county at a competitive disadvantage.

"I do agree that it needs to be progressive, and I think the governor's going in the right direction. I just think it's too high a number to accept," Leggett said of O'Malley's proposal.

In promoting his plan, O'Malley has said that the taxes of more than 90 percent of Marylanders would stay the same or decrease. Leggett's plan calls for raising taxes for many more residents, which he said would enable it to generate at least as much revenue as O'Malley's proposal. According to the draft of Leggett's proposal, tax rates would increase for single filers reporting more than $15,000 in taxable income and for joint filers reporting more than $30,000 combined taxable income.

O'Malley spokesman Rick Abbruzzese said yesterday that the governor has not seen the details of Leggett's proposal but is willing to consider alternatives from him and the county's General Assembly delegation.

"The governor's goals are to make Maryland's tax structure more progressive and fair for working families, and he is willing to consider alternatives that meet those goals," Abbruzzese said.

House Speaker Michael E. Busch (D-Anne Arundel) said he has not seen Leggett's plan but is open to considering it. "We're down here to consider everything," Busch said. "I appreciate County Executive Leggett taking the time to participate in the process."

Sen. Thomas M. Middleton (D-Charles), who is chairman of the Senate Finance Committee and supports O'Malley's plan, said his committee also is willing to study Leggett's proposal.

"There may be a better mousetrap out there," Middleton said. "If you can have a plan that's better, I'm all ears. But at the end of the day, something's got to be done."

Sen. Rona E. Kramer (D), chairwoman of Montgomery's Senate delegation, said that O'Malley's plan "will not sell to the Montgomery County delegation" and that Leggett's proposal is more moderate.

But not all Montgomery legislators embrace their county executive's alternative. Del. Heather R. Mizeur (D-Montgomery) said that she is "sensitive" to Leggett's concerns but that her "top priority is not making sure rich people aren't going to have to pay extra taxes."

The Greater Baltimore Committee, the Baltimore area's largest business lobby, sent a letter this week expressing "reservations" about O'Malley's personal income tax plan but largely supported the governor's other tax initiatives.

News of Leggett's proposal came on a day when state lawmakers heard from Transportation Secretary John D. Porcari about the need to generate more revenue to maintain infrastructure and budget for new projects.

In testimony yesterday, Leggett called for increasing the gas tax to fund $600 million annually for transportation projects, an increase from O'Malley's plan for $400 million. The Montgomery executive said the Washington suburbs need new investments in roads and mass transit.

© 2007 The Washington Post Company