Maryland Gov. Larry Hogan (R) on Tuesday proposed modest tax cuts for senior citizens, low-income families and some manufacturing businesses, fulfilling a central campaign pledge in a manner that he said should appeal to the Democrats who control the state legislature.
Hogan said the cuts, which would amount to an estimated $480 million over five years, would help “Marylanders who desperately need it most.”
The governor declined to explain how he would make up for the lost revenue, saying the details would be included in the budget he will propose next week. But he said last week that the state would carry a cash balance of $445 million going into fiscal 2018, which could help cover the cost.
The governor’s proposals are a first step toward a goal he outlined repeatedly as a candidate in 2014 — offsetting the tax and fee increases the legislature approved during the tenure of his predecessor, Martin O’Malley (D).
At the same time, by reaching out to poor families and senior citizens as well as businesses moving into economically depressed areas, he is increasing the likelihood of winning at least some Democratic support.
“Anyone that isn’t in favor . . . probably doesn’t deserve to be in the legislature,” Hogan said. “I can’t imagine how anybody could vote against these common-sense measures.”
Most of the proposed changes would require the approval of the General Assembly, where Democrats hold strong majorities in both chambers. Democratic leaders expressed cautious optimism on Tuesday that they can work with the governor on the proposals.
“All of these ideas will be well-received, but we need to know the details,” said Del. Maggie L. McIntosh (D-Baltimore), the House Appropriations Committee chair.
Hogan said his tax-relief plan would benefit about 1 million residents — one-sixth of the state’s population — and 300,000 businesses.
The proposals include accelerating an existing plan to increase the Earned Income Tax Credit, which helps families earning less than $53,000 a year. Current law calls for the benefit to increase from 25 percent of the federal Earned Income Tax Credit to 28 percent by fiscal 2019. The governor’s plan would speed up that timeline to fiscal 2017.
Hogan called for a 10-year exemption to the state’s corporate income tax for new manufacturers in designated high-unemployment areas, including Baltimore, Western Maryland and the lower Eastern Shore. Employees who work for those companies and earn less than $65,000 a year would not pay income taxes during that period.
“We’re trying to bring back the manufacturing base, because there are a lot of hardworking people in the heartland of Maryland who want to work, who are looking for skilled-labor jobs,” Hogan said.
Additionally, the governor said he wants to increase the personal-tax exemption for senior citizens from $1,000 to $5,000, phasing in the change over four years. He said his plan would save 640,000 seniors about $183 million over the next five years.
Hogan also proposed rolling back fees for permits, applications and services across state government, including trimming the $300 business-filing fee by $50 a year for the next four years. He said those cuts would save Marylanders $235 million over the next five years.
Sen. Richard S. Madaleno Jr. (D-Montgomery), vice chair of the Senate budget and taxation committee, said that Hogan gleaned several of his proposals from Democrats without giving them credit.
He said the governor’s Earned Income Tax Credit plan would fast-track legislation that Madaleno himself introduced in 2014; the proposed tax credit for manufacturers, he added, mirrors a bill that Sen. Roger Manno (D-Montgomery) sponsored last year.
“I appreciate that the governor has taken on the mantle of what we’ve been talking about,” Madaleno said. “It would be nice if he had talked about it that way.”
Senate Minority Leader J.B. Jennings (R-Baltimore County) said he welcomed the pace and focus of Hogan’s proposals.
“We have to be patient in doing this. It took eight years to raise all these taxes. It will take several to lower them all,” Jennings said. “This shows Governor Hogan is starting to reverse them, turn them back. And he’s doing it with a balanced budget.”
The state’s fiscal outlook has improved dramatically since Hogan took office last year. State analysts are projecting a surplus of $300 million heading into the next budget year. Administration officials have said repeatedly that they prefer to return extra revenue to taxpayers rather than finding new ways to spend it.
State policymakers are awaiting a separate set of tax recommendations from a commission that Democratic leaders appointed to study ways of improving the state’s business climate.
Members of the panel, which includes several lawmakers, have said they do not expect the proposals to be finalized before the start of the legislative session on Wednesday.
The governor made a wisecrack Tuesday about the amount of time the task force is taking to complete its report, joking that he has considered asking the state police to put out an all-points bulletin for the group.
“I’m afraid that the commission may have been hijacked or kidnapped,” he said, adding that he plans to support “any and all” of the panel’s tax-relief recommendations.