Half-mil­lion may mean a whole lot more tax

Se­nate passes $35.9B bud­get

The Washington Times Daily - - Front Page - BY DAVID HILL

AN­NAPO­LIS | The Mary­land Se­nate passed a $35.9 bil­lion bud­get pack­age Thurs­day that would in­crease in­cometax rates on nearly all earn­ers and im­pose a flat in­come tax on res­i­dents mak­ing more than $500,000 a year.

The spend­ing plan would boost the state’s in­come-tax brack­ets by as much as 0.25 per­cent­age point — a move ex­pected to gen­er­ate more than $500 mil­lion next fis­cal year.

The bud­get bill passed af­ter sen­a­tors nar­rowly ap­proved an amend­ment Wed­nes­day night that would al­low the state to tax “half-mil­lion­aires,” who make more than $500,000 an­nu­ally, at the max­i­mum 5.75 per­cent rate for ev­ery dol­lar they earn.

The “half- mil­lion­aire’s tax” — which would gen­er­ate about $30 mil­lion on its own — was a ma­jor point of con­tention dur­ing Se­nate de­bate Thurs­day, with Repub­li­cans and some Democrats de­scrib­ing it as class war­fare against the state’s wealth­i­est res­i­dents.

Un­der the pro­posal, a house­hold that makes $501,000 a year — the min-

imum to qual­ity for the flat tax — would pay over $2,500 more in taxes than a house­hold that makes ex­actly $500,000.

Res­i­dents mak­ing less than $500,000 still would be taxed the tra­di­tional way, with grad­u­ally in­creas­ing rates ap­plied to each chunk of in­come within a cor­re­spond­ing bracket.

Se­nate lead­ers said the change was needed to se­cure cru­cial votes from mem­bers of the Bud­get and Tax­a­tion Com­mit­tee who had un­suc­cess­fully pushed for a higher tax bracket on mil­lion­aires.

The last- minute amend­ment added to the across-the-board tax in­crease that the Se­nate ap­proved in fa­vor of a pro­posal by Gov. Martin O’mal­ley, a Demo­crat, to limit per­sonal ex­emp­tions and item­ized de­duc­tions on the top 20 per­cent of earn­ers.

Mr. O’mal­ley’s plan would have gar­nered $182 mil­lion in in­come-tax in­creases, although it in­cluded other rev­enue-gen­er­at­ing pro­pos­als that the Se­nate re­jected.

The Se­nate nar­rowly ap­proved the tax in­crease, which is de­tailed in one of four bills that com­pose the cham­ber’s bud­get pack­age.

Crit­ics ar­gued the change will dis­cour­age many busi­ness own­ers who are be­ing de­pended upon to drive job growth in the state.

“Karl Marx would be proud,” said Sen. David R. Brink­ley, Fred­er­ick Re­pub­li­can. “This is as anti-en­tre­pre­neur­ial as you can get.”

House Demo­cratic lead­ers expressed se­ri­ous ob­jec­tions to the Se­nate-en­dorsed plan.

Ma­jor­ity Leader Kumar P. Barve, Mont­gomery Demo­crat, said the method of tax­ing half-mil­lion­aires could drive away the state’s high­est earn­ers.

Mr. Barve, who serves on the House Ways and Means Com­mit­tee, which is ex­pected to vet the pro­posal, said he will push to elim­i­nate the flat tax on the rich.

“We know of no spot on Earth that does it like that. It’s not a good thing,” he said. “We would be the only ones and that’s not a way we want to dis­tin­guish our­selves.”

Sen­a­tors passed the rest of the bud­get pack­age largely along party lines but ap­proved the tax in­crease by a nar­row 26-20 vote, with eight of 35 Democrats vot­ing against it.

Sen. Robert A. Zirkin ar­gued that the flat tax on half-mil­lion­aires was a de­struc­tive, un­nec­es­sary ad­di­tion to what was al­ready a bal­anced­bud­get pro­posal.

“You raised their bracket but you also changed the rules of the game for them as well,” said Mr. Zirkin, Bal­ti­more County Demo­crat. “I am ashamed of that amend­ment. ... We’re bet­ter than that here in An­napo­lis.”

Se­nate Pres­i­dent Thomas V. Mike Miller Jr. de­fended the amend­ment as nec­es­sary to the bill’s pas­sage but ac­knowl­edged that the change could drive away some busi­nesses.

Mr. Miller, Prince Ge­orge’s Demo­crat, added that he thinks the in­crease will help the state in the long run by fund­ing and pre­serv­ing im­por­tant public ser­vices.

“We have a re­spon­si­bil­ity to give back,” he said. “If you’ve made a suc­cess of your life, we have an obli­ga­tion to do our part for ev­ery­body and I think that’s what this bill does.”

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