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Maryland Democrats unveil bills to offset changes in federal tax law

Maryland House Speaker Michael E. Busch (D-Anne Arundel), right,  and Senate President Thomas V. Mike Miller Jr. (D-Calvert).
Maryland House Speaker Michael E. Busch (D-Anne Arundel), right, and Senate President Thomas V. Mike Miller Jr. (D-Calvert). (Brian Witte)

Maryland Democrats on Tuesday introduced a package of bills aimed at reversing the impact recent changes to the federal tax code will have on taxpayers and state coffers, their latest effort to roll back changes imposed by President Trump and the ­GOP-controlled Congress.

Gov. Larry Hogan (R), who has pledged to return to taxpayers any revenue they owe the state as a result of new U.S. tax law, said he was "thrilled" at similar ­efforts by the Democratic leaders, even as he bickered with them about the protocol surrounding the unveiling Wednesday of his state budget proposal.

Senate President Thomas V. Mike Miller Jr. (D-Calvert) and House Speaker Michael E. Busch (D-Anne Arundel) said they want to allow taxpayers to receive a state tax credit for donations made to a new state-run charity that would benefit public schools; lower the threshold on taxing the inheritance left by wealthy residents; and restore personal exemptions on state tax returns.

It was not immediately clear if Hogan, who has opposed the estate tax in the past, would support each of those specific proposals.

Busch said Democratic legislative leaders are working with their staff, outside financial and tax consultants, and the office of U.S. Sen. Benjamin L. Cardin (D-Md.) to determine the full impact on taxpayers of the ­federal bill.

"We want to make sure Marylanders can get relief," Busch said. "We don't have all the specifics yet, these are the tools we're going to start with. . . . We're looking for input from everyone."

Democrats in New York, Massachusetts and New Jersey have launched similar efforts.

Hogan said Tuesday that the federal changes could cost Maryland taxpayers close to $1 billion. Democrats estimated that residents of the state claim about $680 million in personal exemptions on their state returns, which were cut as part of the federal tax overhaul. Under the proposal unveiled Tuesday, sponsored by Del. Jay Walker ­(D-Prince George's), those exemptions — about $3,200 a person — would be restored.

The state-run charity that would be created by the Democratic legislation would benefit public schools, according to bill sponsor and House Majority Leader Del. C. William Frick ­(D-Montgomery). It is designed to allow donors to offset the limits federal tax law places on deductions for state taxes starting this year.

Frick said taxpayers who donate would receive a 95 percent state tax credit.

"The state is held harmless because we'll get the same amount of revenue either way, but this provides flexibility for the taxpayers," Frick said.

The legislation affecting wealthy Marylanders uncouples the state from federal estate-tax rules. Under current law, Maryland — which has more millionaires per capita than any other state — is supposed to follow federal estate-tax rules beginning in 2019.

Those new rules raise the threshold for taxing inheritances from $5.49 million to $11 million. Maryland, which currently taxes inheritances greater than $4 million, would lose as much as $60 million a year if it uses the new federal threshold, according to Del. Jimmy Tarlau (D-Prince George's), the bill sponsor.

Progressives have tried unsuccessfully to uncouple Maryland from federal estate-tax rules in previous sessions, but this year legislative leaders are backing the idea.

Democratic leaders complained Tuesday about Hogan's plans for rolling out the budget, saying they will break with precedent by spurning his invitation to attend a private briefing at the governor's mansion shortly before the administration releases the spending plan.

They said Hogan's office waited until Tuesday morning to notify them of the briefing, unlike past years, when they were invited several days in advance. They also chafed at Hogan's decision to explain the budget to Republicans — but not Democrats — on Monday afternoon.

"I don't know of any other governor that hasn't given a week notice or better," said Busch, who has served in the legislature for more than 30 years. "It's the one time when everyone gets together and has some interaction. The unfortunate thing about it is that dialogue will be lost."

Hogan spokesman Doug Mayer disagreed that the timing of the invitation was unusual, saying the budget briefing and ­requests to attend it have "happened various ways over the years."

"This is exactly the kind of silliness that Marylanders are fed up with, whining and complaining about breakfast invites," he said.

The governor provided six days' notice of the briefing last year, according to email records provided by Busch's office.

At a news conference Tuesday, Hogan said his budget will provide a record level of education funding that exceeds the state's funding formulas for schools by $15 million, add $11.5 million to the state's child-care subsidy program and include $6 million to expand tax breaks for manufacturers and other businesses that create new jobs in designated high-unemployment areas.

Hogan also said he would renew his calls for the legislature to reduce automatic spending increases, saying such mandates account for 84 percent of the state's budget and "have put our budget on autopilot for even more spending increases that we simply cannot afford."