By Rolando Garcia
ANNAPOLIS – Some Democratic lawmakers are pushing for higher taxes on wealthy Marylanders to solve the state’s budget problems, but opponents warned Wednesday the tax hikes could drive entrepreneurs to neighboring states.
The Senate Budget and Taxation Committee took up an array of revenue measures, including raising income, alcohol and business taxes, but took no action.
One measure, the so-called millionaire’s tax, would raise the top income tax rate for those making more than $500,000 from 4.75 to 7.75 percent. An individual making $675,000 a year would owe an extra $19,000 in state taxes.
The bill would only impact less than 1 percent of taxpayers and is more politically palatable than other revenue measures, said Sen. Verna Jones, D-Baltimore, bill sponsor.
“I’m sickened by the public service cuts which are hurting those most in need,” Jones said. “We’ve got increased spending without increased revenue, and something has to give.”
The Department of Legislative Services estimates the bill would generate more than $350 million in additional revenue.
Another bill proposed by Sen. Paul Pinsky, D-Prince George’s, would revamp income tax rates to make them more progressive. It exempts the first $3,000 in income, taxes everything above that up to $70,000 at 5 percent and stairsteps to 6.5 percent for taxable income exceeding $333,000.
Because the top rate currently kicks in at $3,000, Maryland essentially has a flat tax, Pinsky said. Under his plan, more than half of taxpayers would get a tax cut, and only a third would see their taxes increase, he added.
“(Under the bill) the top 1 percent still make out like bandits because of the huge federal tax cuts they got,” Pinsky said.
That state income taxes are deductible from federal income taxes would also lessen the blow to the well-heeled, Pinsky said.
Pinsky’s bill would raise an additional $260 million in revenue.
Because many of those targeted by the bills are also state’s most successful entrepreneurs and job-creators, the tax hikes would make it harder to attract new businesses, said Karen Syrylo, spokeswoman for the Maryland Chamber of Commerce.
“(The bills) would put Maryland’s individual (income tax) rates higher than those in almost every other state,” Syrylo said.
The committee also heard testimony on a bill that would raise alcohol taxes.
Sponsored by Sen. Ida Ruben, D-Montgomery, the measure would raise the tax on distilled spirits from $1.50 to $4.50 per gallon, from 40 cents to $1.20 per gallon of wine, and from 9 to 27 cents for beer.
Besides generating an extra $50 million in revenue, the bill would also reduce alcohol consumption and drunk driving, Ruben said.
Liquor store owners and beer distributors argued it would drive Marylanders across state lines to purchase their alcohol.
The committee discussed tax bills late into the evening. On the agenda was a measure, supported by Gov. Robert Ehrlich, to close the so-called Delaware loophole, in which corporations operating in Maryland shift taxable income to subsidiaries in Delaware.
Another bill, sponsored by Senate President Thomas V. Mike Miller Jr., D-Calvert, and 28 other senators, would go further with several measures making more of a corporation’s income subject to Maryland taxes.