A state Senate committee made extensive changes Friday to four tax-relief bills proposed by Maryland Gov. Larry Hogan (R), who aides say could withhold some funding for schools or employee raises unless the legislature approves tax relief.
The Senate Budget and Taxation Committee killed a bill that would have exempted police, firefighters and other first responders from paying income taxes on a chunk of their pensions. It significantly watered down bills that would have halted automatic increases in the state gas tax, eliminated personal property taxes for some small businesses and exempted all military retirement income from being taxed.
Budget Secretary David Brinkley said the failure to grant tax relief could affect Hogan’s willingness to sign off on votes by the Democratic-led legislature to add school funding to the governor’s budget proposal or to grant a 2 percent cost-of-living raise for state employees.
“They are not done deals,” Brinkley said.
In an interview earlier Friday, Hogan said he was committed to finding a way to deliver a tax break, a central promise he made on the campaign trail last year.
“We’re not going to reach any budget agreement without tax relief,” Hogan said.
“It’s the No. 1 issue for the voters of Maryland.”
Senate President Thomas V. Mike Miller Jr. (D-Calvert) pledged this week to work with Hogan on his tax-relief proposals, in part to show appreciation for the governor’s willingness to add money back to the budget for education and other needs.
What was unclear Friday was whether what remained of the tax-relief bills would be enough to meet the governor’s threshold.
The Senate committee stripped out of the gas-tax bill a provision that would have halted automatic increases scheduled to take place every year as well as other provisions that also would have decreased revenue the state is planning to use for transportation projects.
They left — and approved — one part of the bill: lowering the cap on inflation-related increases in the gas tax to 3 percent instead of 8 percent.
The committee approved Hogan’s proposal to stop charging personal property taxes to small business that have assets worth less than $10,000 but said that can only happen after the state tax division in charge of collecting that money is audited.
In addition, the Senate committee approved a bill, introduced by Sen. Douglas J.J. Peters (D-Prince George’s), that would expand a tax exemption for military pensions for veterans older than 65.
Hogan had introduced a similar bill, which was replaced with Peters’s legislation.
The watered-down gas-tax bill, the property-tax bill and the military pension bill are headed to the full Senate next week. If they win passage there, they will be considered by the House of Delegates.
Last year, as an underdog gubernatorial candidate in a heavily Democratic state, Hogan campaigned by attacking then-Gov. Martin O’Malley (D) for instituting or increasing dozens of taxes and fees during his eight years in office.
Hogan promised voters that if he were elected, he would eliminate as many of those increases as possible.
But Democratic leaders have been slow to embrace the governor’s proposals, given the tight budget and their own priorities, including devoting more money to school construction.
In addition to Hogan’s tax-relief bills, the fate of a bill related to the storm-water remediation fee — which the governor likes to call a “rain tax” — also remains up in the air.
Both legislative chambers killed a rain-tax bill sponsored by Hogan, but the Senate passed a similar one sponsored by Miller, which is being considered by the House of Delegates.
The bill removes a state requirement that the most populous jurisdictions charge a specific storm-water remediation fee. But it would also require large jurisdictions to provide more documentation of how they are cleaning storm water of pollutants.
House Speaker Michael E. Busch (D-Anne Arundel) said that requirement could be enough for his chamber to support the bill.
“I think we’re going to agree with a lot of it, quite candidly,” he said.
Brinkley said that Hogan wants Miller’s bill to pass but would not count it as state tax relief because it only affects some local jurisdictions and does not necessarily eliminate a specific fee.