Maryland Lawmakers Take Up Tax Increases in Special Session

Maryland lawmakers convened for a highly unusual special session Monday to take up an income tax increase on people who make more than $100,000, after a revenue package fell apart in the last hours of the regular 90-day session last month.

In effect, lawmakers largely were picking up where they left off after time ran out at midnight on April 9. The Senate moved swiftly to give the budget measures preliminary approval Monday evening. The Senate is poised to move the legislation to the House of Delegates on Tuesday.

The package includes tax increases on tobacco products other than cigarettes and a split of teacher pension costs with local governments. The session is not expected to last more than three days.

Democrats say the new revenues are needed to avert more than $500 million in cuts from a so-called “doomsday budget” that was triggered at the end of the regular session to fill the hole created by the failure of the new tax revenue.

“In general, I think this is the responsible thing to do,” House Speaker Michael Busch, D-Anne Arundel, told reporters. “We worked on it for 90 days. We're back here, unfortunately, because we didn't complete the job in that period of time. There's not a whole lot of change in the philosophy of what's taking place.”

Lawmakers don't expect the divisions this time that derailed the budget package last month. A controversial proposal to expand gambling has been taken out of the debate for another special session later. Disagreements between the House and Senate on the revenue package also have been put to rest.

“That's been ironed out,” said Delegate Kumar Barve, D-Montgomery.

The tax increases mirror the ones approved by a panel of House and Senate negotiators on the last night of the regular session. They will affect about 16 percent of the state's top taxpayers.

Single filers who make between $100,001 and $125,000 and joint filers who make between $150,001 and $175,000 will see their state income tax rate rise from 4.75 to 5 percent.

Rates for single filers who make between $125,001 and $150,000 would rise from 4.75 to 5.25 percent. The 5.25 percent rate would apply to joint filers who make between $175,001 and $225,000.

Rates would rise from 5 percent to 5.5 percent for singles who make between $150,001 and $250,000 and joint filers who make $225,001 to $300,000.

Single and joint filers who make more than $250,000 would pay 5.75 percent.

“It's a small amount to pay for living in this great state and this great country,” Senate President Thomas V. Mike Miller, D-Calvert, told reporters after an organizational session Monday morning.

But Republicans denounced the special session as unnecessary. They say the state could live with the reductions already in place.

“We need to have self-control, and we need to live within the budget we have,” said Sen. Edward Reilly, R-Anne Arundel, speaking at a morning news conference with other Maryland Republicans.

Sen. Nancy Jacobs, R-Harford, criticized Democratic Gov. Martin O'Malley for calling the special session, saying he's out of touch with ordinary state residents.

“He has no idea what the citizens of this state are going through,” Jacobs said.

Democrats countered that the cuts would hurt the state far more than the tax increases would affect people whose incomes are over $100,000 a year.

Delegate John Bohanan, D-St. Mary's, noted that college tuition would rise by hundreds of dollars. He also said the cuts to state agencies in the “doomsday budget” would have a serious impact on state government that already has been reduced after years of cuts caused by the recession and its aftermath.

“We are here as state legislators to run state government,” Bohanan said. “We've got to start worrying and focusing on the health of our state government.”

Joe Bryce, O'Malley's chief legislative officer, pointed out that O'Malley would have to make more cuts through the Board of Public Works with action by the Legislature, because the state's budget is about $71 million out of balance.

“This is actually one of the more stark choices we've ever been presented with, because we know what is going to happen come July 1 if we don't act,” Bryce told the House Appropriations Committee.

Lawmakers are aiming to reduce an ongoing budget deficit of about $1.1 billion by about half. They are planning to address the other half of the structural deficit next year.

Many of the cuts in the “doomsday budget” would affect education and state agencies.

For example, the Geographic Cost of Education Index, which helps parts of the state where schooling costs more, would have been eliminated to save about $129 million. Public higher education would be cut by 10 percent to save $38.5 million. Legislative scholarships awarded by lawmakers would be cut as well to save about $12 million.

State employees also would feel the pain without the revenue plan. Cost-of-living adjustments for state employees would be cut to save $33.8 million. There would be 500 state jobs eliminated to save about $30 million.

Besides the revenue measure that failed in the regular session, the General Assembly failed to pass a budget reconciliation measure needed to balance the state's books. That bill included a split of teacher pension costs to the counties, as well as tax increases on tobacco products other than cigarettes. Those provisions also are being taken up in the special session.

Taxes on “little cigars” would increase from 15 percent of wholesale to 70 percent. Taxes on smokeless tobacco such as snuff would rise from 15 percent to 30 percent. There would be no change on premium cigars.

For the teacher pension split, about 50 percent of the cost would be split in the first year, 65 percent in the second, 85 percent in the third and the rest in the fourth year. The state currently pays the entire pension cost, which has gone up sharply in recent years.