Facing a Monday deadline to adjourn, Maryland lawmakers were unable to reach a budget deal Friday before they broke early for observances of Good Friday and Passover.
The House and Senate scheduled sessions beginning Saturday morning, and leaders of both chambers said they remained optimistic that they could strike a deal to raise taxes and overcome what has been the major sticking point in a nearly $36 billion spending plan.
Negotiators appeared to be homing in on a plan Friday to focus tax increases on six-figure earners.
That followed a concession by Senate leaders late Thursday. They eased away from plans for an across-the-board income tax hike in exchange for even higher tax increases than the House or Senate approved last month on those making at least $100,000.
The Senate compromise fell in line with a key requirement of House Democrats to limit tax increases to those making six figures or more, and took a symbolic step in the direction of the tax plan first proposed by Gov. Martin O’Malley.
His plan, which has largely been scrapped by the General Assembly, would have raised roughly $300 million through limiting tax deductions and exemptions for the top fifth of the state’s earners.
Leaders of the Republican minority in both chambers said Democrats were not even considering cuts or slower growth in education, health care and other programs that could prevent the need for the new taxes.
Politically, Democrats seemed concerned with making sure the revenue package would continue to let O’Malley (D) and other state party leaders advocate a national Democratic Party line that the rich must pay a “fair share” to balance government budgets.
But the compromise plan would also expose Maryland Democrats to charges of redefining high-income earners and increasing taxes most on incomes that in the suburbs of the nation’s capital are largely seen not as wealthy 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 point, to 8.4 percent.
At the high end, millionaires would see their total combined rate top out at 8.95 percent.
As a percentage, that’s an increase of 0.25 percent, or less than the 0.45 percent 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 unwelcome distinction of having one of the nation’s top rates.
As it is, 8.95 percent would put Maryland in a tie with the District for fourth-highest rate nationwide. House lawmakers say they are focused on reducing the Senate’s proposed rate increase on those making $100,000.
That 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.