Tax Increases on Special Session Menu

Some Maryland residents will pay more taxes in the coming year under a plan worked out between Gov. Martin O'Malley and legislative leaders.

O'Malley, accompanied by House Speaker Michael Busch and Senate President Thomas V. "Mike" Miller, announced the nearly $35.8 billion plan during a Wednesday news conference in Annapolis .

Details of the proposed special session budget were limited to the 22 minute press briefing. No documentation or bill was available for review.

Republican Sen. E.J. Pipkin called the plan and the lack of details, less than a week before the opening of the session, "a trip to bizarre-world."

"We don't know what the bill is," said Pipkin, an Upper Eastern Shore Republican. "Is this any way to run a state?"

The legislature will reconvene for a special session beginning May 14 to approve a new budget plan that will supersede the $35.5 billion so-called "doomsday budget." That plan, which passed in the final hours of the 90-day session that ended in April, contained more than $500 million in cuts to schools, libraries and public safety.

"A cuts-only approach would help no one and it would harm all of us," O'Malley said.

"The better approach is the balanced approach—an approach of cuts, investments and yes revenues," O'Malley said, adding that the "doomsday budget" was $71 million out of balance.

The special session will focus solely on the budget, according to the governor.

Tax Increases

As part of the budget package under consideration, O'Malley said the state will make almost $600 million in additional cuts to the budget.

State Budget Secretary T. Eloise Foster said $247 million in additional revenues will come through increases in taxes and elimination of exemptions.

• Under the proposed budget plan, taxpayers filing individually who make $100,000 annually will see their tax rate increase from 4.5 percent to 5 percent.
• Individuals making $500,000 to $999,000 annually will see their rates increase from 5.5 percent to 5.75 percent.
• Couples filing jointly and earning $150,000 will see rates increase from 4.75 percent to 5 percent.
• Joint filers earning more than $500,000 will see rates increase from 5.5 percent to 5.75 percent.

"At the end of this session, approximately 16 percent of us will be asked to pay a little more or stated differently, will receive a little less back in state income tax refunds," O'Malley said.

Teacher Pensions

O'Malley said the plan will also contain a back to local jurisdictions.

"I would call it a pension sharing rather than a shift," O'Malley said. "The opponents try to make it seem as if the state was getting out of the business of education and shifting it to the counties. That's absolutely false and once this budget is concluded, it will be a full funding of public education."

Under that plan, the state will phase-in cost sharing over four years. When finished, O'Malley said the state and local governments will split teacher pension costs evenly.

O'Malley said the state also expects to save about $80 million in Medicaid spending as a result of changes in federal law.

Busch and Miller said they expect the session, which is expected to cost about $20,000 per day, to last three days.

Pipkin said he plans to propose an amendment that would further reduce the budget passed in April, essentially flat funding it at the current fiscal year 2012 spending levels.

"The budget we passed in April is $700 million larger than the previous year," Pipkin said. "We're going back to increase taxes and shift pensions to the counties. That's crazy."