House and Senate staffers are working to organize a behind-the-scenes meeting with key negotiators Friday afternoon. That could lead to an agreement in principle on how much to raise income taxes on high-income earners, but without a public vote, odds are increasing that the budget plan may not be ready for a final vote in either chamber before Monday.
If that turns out to be true, it would mark the first time in several years that lawmakers would spend their final day in Annapolis debating the year’s spending plan.
Such a scenario generally favors Republicans. Although they cannot stop passage of the spending plan, they can tie up crucial final hours with floor debate, preventing votes on hundreds of other Democrat-sponsored bills.
This year, a final, frantic day on the budget could also crowd out a bill to allow a casino in Prince George’s County and Gov. Martin O’Malley’s (D) core priorities to create a subsidy for offshore wind power, set up a way to expand public-private partnerships, and salvage a moribund proposal to raise the state’s gas tax.
O’Malley has essentially lost on his budget proposal. Neither the House nor Senate agreed with the bulk of his tax package, which would have raised about $300 million annually by limiting income tax deductions and exemptions on high-income earners.
The two chambers instead are homing in on a plan to increase base income-tax rates on six-figure earners, and to reduce personal exemptions that all Marylanders can claim.
The upper chamber said it would ease away from plans for an across-the-board income tax hike in exchange for an even higher tax rate on six-figure earners than either chamber previously approved.
In limiting the bulk of tax increases to high-income earners, the compromise plan would make it easier for O’Malley to continue to advocate nationally for a party line that the rich must pay a “fair share” to balance government budgets. That is a central tenet of President Obama’s 2012 platform, and one O’Malley has ascribed to in national appearances as a surrogate for Obama.
But the compromise plan would also expose Maryland Democrats to charges of redefining high-income earners, and increasing taxes the most on incomes that in the suburbs of the nation’s capital are largely seen not as rich but as upper middle-class.
The state’s tax rate on singles making $100,000 and couples earning $150,000 would jump from 4.75 percent to 5.20 percent. With local add-ons, the combined state-local rate would increase nearly half a percentage to 8.4 percent.
At the top end, millionaires would see their total combined rate top out at 8.95 percent.
As a percentage, that’s an increase of .25 percent, or less than the .45 percentage increase on those making $100,000.
House staffers said they were working on a plan to even out the tax increases, but lawmakers in both chambers have been loath to consider raising the top-end bracket above a combined 9 percent, which would give Maryland the distinction of having one of the nation’s highest rates.
As it is, 8.95 percent would tie Maryland with the District for fourth-highest nationwide.
House lawmakers are focused on reducing the Senate’s proposed rate increase on those making $100,000.
That, however, carries another risk, as it would reduce the total amount the state would collect to well below $300 million, or the level that the Senate contends is necessary to avoid other cuts to state services.
The two sides are also still at odds over a plan that would lower personal exemptions that every Maryland taxpayer could claim by at least $200 per person.