By SARAH TINCHER
ANNAPOLIS (Feb. 28, 2014)—Maryland residents could see relief from the state income, sales and estate taxes as the General Assembly tackles measures that propose lower tax rates and raise estate tax exemption thresholds .
State lawmakers are facing a largely bipartisan effort to lower some of these taxes in order to keep Marylands residents, businesses and money in Maryland. But Gov. Martin OMalley, who ultimately must sign any approved cuts into law, did not propose any sweeping tax changes in his annual budget.
While the House Republican Caucus is making a push to lower taxes during the 2014 session, the overall effort to decrease income and sales tax rates has received support from both sides of the aisle, with significant Democratic support to raise the estate tax threshold.
I don't think it's a matter of Democrats and Republicans, said Delegate Frank Turner, D-Howard, who co-sponsors several tax bills. All bills have a chance. We're going to sit back and we're going to discuss it, and
we're going to see what is in the best interest of the state.
One measure, before the House Ways and Means Committee, is the Republican-sponsored Income Tax Relief Act of 2014, which would gradually reduce the states personal income tax by 10 percent over three years.
Primary bill sponsor Delegate Andrew Serafini, R-Washington, recently told the committee that reducing the personal income tax would make things better for Maryland families, small businesses and the economy.
Serafinis testimony which saw little testimony in opposition centered around the idea that decreasing taxes allows residents to keep the money they earn, increases consumption, drives the economy and leads to more state revenue.
We want consumption, he said. Thats what drives our economy for everybody.
The committee also heard bipartisan legislation that proposes a flat 3.5 percent income tax rate to everyone whose annual income exceeds $30,000. If passed, Maryland would join the other eight states that have a flat income tax rate, ousting the current law which follows an eight-bracket system that taxes residents between 2 percent and 5.75 percent based on income.
Serafini, who is also this bills primary sponsor, told the committee the legislation was proposed to make income tax simple, transparent, fair, efficient and stable.
In addition to measures that would change personal tax rates, legislators are also examining the states corporate tax structure.
Since the end of January, the Ways and Means and Senate Budget and Taxation committees have reviewed a total of six bills three proposed in both chambers and an additional three in the House that propose to lower the corporate income tax rate, which currently stands at 8.25 percent, to rates varying between 4 percent and 7 percent.
Serafini, who sponsored legislation to reduce the corporate income tax rate to 4 percent, said that the states corporate income tax is relatively unlucrative, raising $872 million a year, which represents only 3.2 percent of Marylands total tax revenues. But as the 14th-highest corporate income tax rate in the country, the tax makes Maryland far less competitive in the business market, he said.
Ben Wilterdink, a research analyst for the Center for State Fiscal Reform at the American Legislative Exchange Council, followed Serafinis testimony in support of the bill: [The corporate income tax] burden is passed on to the consumer, to the shareholder and even to employees who have to work for lower wages than they otherwise would be. A recent Treasury Department study even found that the laborer bears at least 40 percent of the corporate income tax in the form of lower wages.
Republicans in both the House and Senate would also like to roll back the sales tax from 6 percent to 5 percent, to its pre-2007 level.
In contrast to the numerous legislation that boast application to all residents, both committees have also heard bills regarding estate and inheritance taxes, which only apply to the states millionaires.
In the first week of February, the Senate and House committees heard several bills that propose to raise the states current $1 million threshold at which the estate tax applies. Both committees are also set to simultaneously hear Democrat-dominated bills on March 5, which are backed by Senate President Thomas V. Mike Miller, Jr. and House Speaker Michael E. Busch, that would gradually raise the states estate tax exemption rate to match the Federal level of $5.34 million over four years.
Ways and Means has also seen one bill to repeal both the estate and inheritance taxes, while a similar bill to repeal only the inheritance tax has also circulated through Budget and Taxation.
Delegate Susan Krebs, R-Carroll, who is the primary sponsor of one bill that proposes to set the estate tax exemption to the federal level, and another that advocates for the repeal of estate and inheritance taxes, said there is a vast amount of wealth leaving Maryland as people move to states with lower tax burdens.
[The legislation] would make Maryland more competitive with the rest of the country. We are suffering from tax flight. Millions of dollars lost every year as wealthy residents are leaving Maryland, Krebs said. I believe it would encourage our millionaires and retirees to stay around rather than to relocate to more tax-friendly states.