The Maryland House of Delegates today approved a bill to alter the state's income tax laws, to keep married persons who benefit from a new federal deduction from claiming that same deduction on their state taxes.
Because Maryland long ago eliminated the so-called "marriage penalty" that is the target of the new federal tax law, married couples in the state would get a double tax break and the state would lose $45 million a year by 1986 if the bill approved today is not passed by the Senate.
Under the old federal law, because of the way tax brackets work, the taxes of a working married couple were substantially higher than if they were single and filed separately. The new federal law provides a special 5 percent deduction--up to $1,500--off of a working spouse's wages this tax year. Next year, that deduction increases to 10 percent, up to a $3,000 maximum.
Because Maryland's tax form is essentially patterned after the federal model, married taxpayers in effect would get that same deduction from their state income taxes if the legislature does not act. Maryland does not have the so-called marriage penalty, since wage earners in two-income families already are allowed to file separately.
The bill passed today would disallow the federal deduction from the state income taxes. Without the bill, married people in the state could get a double break on their 1982 taxes--as much as $202.50 per couple this year and up to $315 from then on.
The House gave final approval to the bill by an overwhelming 118-to-8 vote, after the sponsors of the measure explained to several skeptical delegates that it would not actually increase any taxes for any married state residents.
The measure now goes before the Senate, where it is also expected to pass.
Because Maryland's tax form is so closely linked to the federal, several other new federal tax cuts passed last year also will automatically reduce state tax revenues drastically unless the General Assembly acts this year.
Cutbacks in the federal corporate tax and new federal rules for depreciation on business equipment will cut back sharply on state corporate tax receipts, and several separate pending bills would disallow those deductions. Legislators here said, however, that disallowing the other tax deductions likely will run into stiffer opposition than the marriage bill, which was approved rather swiftly.
Del. Pauline Menes (D-Prince George's) is sponsoring a bill to allow corporations to claim only about half of their federal deductions on their state tax returns. "The people changing plans at the federal level are only concerned about the federal level, and not the devastating impact on the states," she said.
In other action, the House gave final approval to a corrected version of Gov. Harry Hughes' redistricting plan, which allows Prince George's County to retain some of its legislative clout.
That plan now goes to the Senate, where President James Clark Jr. (D-Howard and Montgomery) is fighting to restore his old district to its original shape. Clark's district was altered to accommodate Prince George's.