Maryland Senate Approves Higher Taxes For The Wealthy

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The Maryland State Capitol Building in Annapolis. (Photo credit: JIM WATSON/AFP/Getty Images)

The Maryland State Capitol Building in Annapolis. (Photo credit: JIM WATSON/AFP/Getty Images)

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ANNAPOLIS, Md. (CBSDC/AP) — The Maryland Senate on Wednesday approved an amendment to state budget legislation to squeeze extra tax money out of people who make more than $500,000 a year.

The Senate decided to apply a 5.75 percent income tax rate on all of an individual’s taxable income, if the taxpayer makes more than $500,000. The measure to raise the income tax on most taxpayers previously would not have applied the top rate to all of the income earned by someone in the top bracket.

“It was a nod to the more progressive members of our caucus — that we were listening to their concerns,” Senate President Thomas V. Mike Miller, D-Calvert, said after session Wednesday night.

Republican Sen. E.J. Pipkin, R-Cecil, described the measure as a mistake.

“You’re sending the wrong message to job creators,” Pipkin said.

The Senate also has included an amendment to withhold $500,000 from a state agency — unless it provides more information about Gov. Martin O’Malley’s proposal to relocate a housing department.

The Democrat-controlled Senate also rejected amendments offered by Republican lawmakers, including one to avoid an income tax increase by making deeper budget cuts.

Lawmakers in both parties have been frustrated about the Department of General Service’s silence on questions about O’Malley’s plan to move the Department of Housing and Community Development from a state-owned building in Anne Arundel County to a future new building near the New Carrollton Metro Station in Prince George’s County. The budget amendment is designed to prompt the administration to release more details.

“I want to commend you for that because they have not been providing the Anne Arundel County delegation that information, which we’ve requested for over 12 months, and it’s problematic for us,” Sen. Edward Reilly, R-Anne Arundel, said to Sen. James Robey, D-Howard, who explained the budget amendment on the Senate floor.

The Department of General Services would be required to submit a report answering numerous questions relating to costs. The report would have to be submitted 45 days before the Board of Public Works reviews a lease agreement for the building.

Sen. Allan Kittleman, R-Howard, asked why the Senate panel noted in its explanation of the amendment that DGS has been “unwilling” to provide many answers.

“That was our interpretation,” Robey responded. “Apparently, we’re experiencing the same difficulties that the Anne Arundel County delegation is experiencing. We’ve asked for the information, and the fact that they have not responded to me is an unwillingness.”

The housing department’s current location in Crownsville has about 380 employees.

Raquel Guillory, a spokeswoman for O’Malley, said the agency is acting on the advice of counsel. She declined to comment further.

The Senate convened for two sessions to consider amendments to a complex budget package, which includes four separate pieces of legislation. A bill to increase income taxes and another to close loopholes in local school funding requirements are being used in tandem with other budget legislation. Together, they would balance the state’s books for the next fiscal year and cut an ongoing $1.1 billion deficit in half.

The Senate gave the measures preliminary approval Wednesday night, and a vote to send the legislation over to the House of Delegates was expected Thursday.

The income tax increase would raise an estimated $416 million initially, reflecting the revenue impact from one and a half tax years. In fiscal year 2014, it would raise an estimated $297 million.

“Our revenue proposal is progressive,” said Sen. Edward Kasemeyer, D-Baltimore County and chairman of the Senate Budget and Taxation Committee. “It is based on the ability to pay, and it expands the refundable earned income tax credit.”

Pipkin pushed for an amendment that would have avoided tax increases and a split of teacher retirement costs with local governments by making an additional $1.2 billion in budget cuts. In effect, Pipkin said, the cuts would simply reduce the state budget to what it was last year. The senator’s plan called for spreading the pain around state government, with cuts to education, health and transportation.

“All it is (doing) is paring back the increases for this year, and I think that’s part of what Maryland’s families are looking to see us accomplish here,” Sen. David Brinkley, R-Frederick, said. “They’re having to do it with their personal budget.”

Pipkin’s amendment failed on a 15-30 vote.

The state’s general fund, which is the state’s operating budget, is about $15.4 billion for fiscal year 2013, which begins July 1. Maryland’s total budget, including federal money and special funds, is about $35.9 billion.

A separate measure that’s part of the budget package would require counties to get waivers from the state if they can’t comply with the state’s maintenance-of-effort law on funding education. The law requires a county to spend at least the same amount on a per-pupil basis as the year before, so counties don’t go backward in education funding.

Some counties have ignored applying for waivers from the state in recent years; the measure would require them to do so. There are currently seven counties that are not meeting the requirement in the current fiscal year: Anne Arundel, Dorchester, Kent, Montgomery, Queen Anne’s, Talbot and Wicomico.

News of the lawmakers’ proposal to tax the wealthy comes on the same day Gov. O’Malley officially pitched a 6 percent gas tax increase.

(TM and Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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