Maryland’s Senate passed, and the House advanced, the state’s first major package of tax increases in five years Tuesday, but in contrast to their party’s national position, not all of the General Assembly’s Democrats were united on the wisdom of raising taxes on the rich.
With a final vote expected Wednesday, some Democrats warned against the plan to ratchet up taxes on residents making more than $100,000. They cautioned that it could push Montgomery County and the state’s Washington suburbs to a tipping point of becoming uncompetitive with Northern Virginia.
Under the plan, Maryland’s top state-local tax bracket would tie the District’s as the fourth-highest nationwide.
A handful of Montgomery lawmakers also balked that the county’s affluence would mean its residents would pay a disproportionately large share of the increase. Montgomery has 18 percent of Maryland taxpayers but would pay 40 percent of the additional revenue collected under the plan.
The $260 million tax package would raise income taxes by a quarter of a percentage point for most Marylanders who make more than $100,000. For joint filers, the higher rates would kick in at a taxable income of $150,000. The personal deductions that six-figure earners could claim would also be lowered.
The package also would raise levies on commercial real-estate deals, tobacco products and death certificates. It would allow the administration of Gov. Martin O’Malley (D) to continue record spending on education and to help fund other Democratic priorities, including 2 percent raises for state employees.
“I’m concerned there’s a lack of understanding about the implications. Are we making Montgomery County uncompetitive with Fairfax? There is a tipping point, and I think we are perilously close to it right now,” said Del. Benjamin F. Kramer (Montgomery), who was among a handful of House Democrats who said they would prefer an alternative to boost the state’s sales tax.
One in every five Senate Democrats voted against the tax package Tuesday, but none of them were from Montgomery.
“What would hit some of our county families harder, paying $250 in additional taxes or $3,000 in additional tuition?” asked Sen. Richard S. Madaleno Jr. (D-Montgomery), referring to estimates of the planned tax increase on a family reporting income of $150,000, or without it, the possible tuition increase that might be required at the University of Maryland.
“To me, this is a fair approach,” Madaleno said.
“The irony is, I don’t hear fellow Democrats criticizing Rep. [Chris] Van Hollen, Sen. [Benjamin L.] Cardin or Sen. [Barbara A.] Mikulski because they are not standing up to President Obama because our county is going to pay too much in taxes,” Madaleno said, referring to those Maryland Democrats in Congress.
“It’s funny that as progressive Democrats, we value it at the national level, but at the state level, it’s like ‘whoa,’ ” he said.
Kramer said that position ignores regional competition.
“At the federal level, it affects all 50 states. When you are doing at an individual state level, particularly in the Washington metropolitan area, we are exposing ourselves to having high-wage earners locate in neighboring jurisdictions.”
During a heated floor debate on the tax package Tuesday night, Del. Charles E. Barkley (D-Montgomery) introduced an amendment to do away with the proposed income-tax increases and replace them with a one-cent rise in the sales tax, which he said would be more fair and gain enough revenue to prevent the state from facing another deficit next year. It was roundly rejected.
“The tracks have been greased to accomplish the end game,” Kramer said.
Last month, Democratic leaders of the House and Senate agreed on the tax package deal on the final night of the legislature’s annual session. But amid brinkmanship over a bill to expand casino gambling, the revenue package never was brought to a vote.
In recent weeks, O’Malley and legislative leaders agreed to bring lawmakers back to Annapolis to vote on the tax increases, and to deal with gambling afterward.
Sen. Roger Manno (D-Montgomery), who drafted the income-tax plan, said he knew few would be pleased with the outcome of the special session.
“My guiding principle in this whole thing is to try to do what’s fair, whether it’s popular or not,” said Manno, who acknowledged he had heard from many constituents, including his next-door neighbor, with concerns.
He said he was comfortable with his county taking the biggest tax hit.
“I suppose we’re blessed to be in a better position than many other counties in the country,” he said.
Sen. Allan H. Kittleman (R-Howard) said he was baffled that so many Montgomery Democrats would support the plan. “If they vote for the income tax increase, they’re voting against the interests of a lot of their citizens.”
Kittleman said he voted against the bill, in part, because of the impact on more affluent residents in his county. According to legislative analysts, the increase would affect 25.2 percent of Howard County tax filers — a higher percentage than in Montgomery.
Staff writer John Wagner contributed to this report.