Maryland Gov.-elect Harry Hughes is expected to introduce tax legislation next week that could save the state's tax-payers more than $30 million.
The legislation, which state legislators anticipated today, would increase benefits to homeowners under the circuit breaker property tax credit program and possibly introduce a similar program for renters.
The governor also is expected to introduce a bill to increase the standard income tax deduction from $500 to $1,500 for singles and from $1,000 to $3,000 for those filing joint income tax returns. A couple filing joint returns could save about $140, a legislative side said.
"It can be a significant item," said Sen. Laurence Levitan (D-Montgomery), who is chairman of the Senate Budget and Taxation Committee. "We all know it's coming. It's part of the governor's package."
One legislative aide said that both proposals "could be a windfall for renters" because most renters file standard deductions and could benefit if a renters' circuit breaker is introduced.
The aide added that bills being drafted would allow the circuit breaker program to be more generous to homeowners, particularly because the program last year cost the state only about $4 million of the $22 million budgeted for it. The $18 million surplus was added to the state treasury, the aide said.
The circuit breaker program, now renamed the Homeowners Tax Credit Program, allocates property tax credit based on a formula comparing income and an ideal property tax. Under the present formula, homeowners who are disabled or at least 60 years old can receive full credit. Those under 60 receive a half credit.
But the new plan is expected to give those under 60 a full credit. For instance, a person earning $12,000 a year would pay a maximum of $420 in property taxes. If taxes are charged over that amount, the homeowner can receive the difference as a tax credit.
Several other bills were introduced today at the opening of the new legislative session. They include measures to allow tax credits to persons who house and care for relatives 65 years old or older and who cannot care for themselves, allow a tax credit of 10 percent of the cost of buying and intalling energy-conserving equipment and eliminate the retail sales tax on certain types of insulation.
"Bills relating to energy conservation have a fair chance of passing," Levitan said.
Fred Rummage (D-Prince George's), chairman of the House Committee on Economic Matters, said that many tax bills affecting one group such as the elderly or the disabled fail. "Legislators like to come up with a total package that has an impact across the board, not just for one group," Rummage said.
Other tax-related bills introduced today would eliminate the retail sales tax on food for human consumption, change the retail sales tax from five cents on the dollar to four cents and eliminate the sales tax on most farm equipment.
Two bills would lower the ceiling on the amount of finance charges on open-end accounts. One would limit the charge to one percent per month on the outstanding balance and the other would limit the charge to 1.5 percent each month on a balance of $3,500 or less.
When determining how they will vote on tax issues, legislators consider how much it will cost the general economy and whether it will give an unfair advantage or disadvantage to a particular group, Levitan said.
For instance, "Eliminating the sales tax on food is too expensive," he said.
One legislative aide predicted the legislature probably will agree to allow taxpayers to continue deducting the nine-cent-per-gallon sales tax on gasoline although the federal government stopped it last year. Continuing the deduction "wouldn't be a big revenue loss. I doubt it would lose $1 million," the aide said.