Tax Cuts a Top Matter Before Maryland Lawmakers

One of the major decisions facing Maryland legislators this session is whether to cut taxes, which ones and by how much, the General Assembly's chief budget analyst told lawmakers Tuesday.

Warren Deschenaux briefed lawmakers on the two fiscal panels that steer state spending about Republican Gov. Larry Hogan's $42 billion budget for the next fiscal year. Lawmakers in the Democratic-led General Assembly will be working on the budget for most of the session.

Hogan campaigned on cutting taxes and improving the state's business climate, often criticizing his predecessor, former Gov. Martin O'Malley, for pushing through a wide variety of tax increases and fees, which he said scared away businesses. Hogan has proposed about $480 million in tax cuts over five years. A commission formed by the General Assembly has made its own tax-relief proposals, geared mostly to making the state more competitive with neighboring states for attracting and keeping businesses. It would add up to about $380 million, if all 14 recommendations are fully implemented.

With a menu of tax-relief items before them, Deschenaux said lawmakers will need to decide whether the state can afford to cut state revenues, given future financial uncertainty.

“So you'll have to evaluate just what it is you want to do and how much you want to spend, and I think that'll be probably -- from a macro standpoint -- the most important set of decisions you make this session,” Deschenaux said.

Hogan's budget contains a surplus of about $450 million. It also puts about $1.1 billion into the state's rainy day fund.

The governor's tax-relief plan includes phasing in an increase in personal-income-tax exemptions for seniors 65 and older to $5,000 over four years, above the current exemption of $1,000. He also wants to accelerate an increase of the state's Earned Income Tax Credit for families earning less than $53,000 a year.

The governor also is looking to cut taxes to attract manufacturers. That includes eliminating the state's 8.25 percent corporate income tax for 10 years on new manufacturers that bring jobs to western Maryland, the lower Eastern Shore and the city of Baltimore. Hogan also wants to roll back 100 fees affecting all taxpayers, and reduce a $300 business filing fee by $50 a year.

The Augustine Commission, convened by leading Democratic lawmakers, would reduce the state's corporate income tax from 8.25 percent to 7 percent over three years. It also would accelerate the planned recoupling of Maryland's estate tax exemption to the federal estate tax exemption this year. The panel is recommending the state not apply the corporate income tax on repatriated overseas earnings that have been taxed abroad, if the funds are invested in Maryland.

The panel also calls for reviewing state and local individual income tax rates and brackets to determine reductions that will reduce tax burdens, implementing them when the state's fiscal circumstances allow.

Copyright AP - Associated Press
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