Tax Increases On Special Session Menu

UPDATE (5:59 p.m.)—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 morning news conference in Annapolis to discuss the upcoming special session.

"To leave this budget incomplete, to leave this budget as it stands right now, would damage the very forward motion that all of us, together, have worked so hard to achieve for our state," O'Malley said.

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"Progress is a choice," O'Malley said. "Job creation is a choice. Building America's number one schools, making a college education affordable, continuing to drive crime down to now a 35-year low, reviving and restoring the Chesapeake Bay and bringing the crab population back, all of these things are choices. Unleashing the healing power bio-technology and the jobs that come with that, eradicating child hunger, defending our triple-A bond rating—these things don't happen by themselves."

The proposed budget grows by about 2.6 percent over the current budget year that ends June 30. If approved, the state will end the fiscal year 2013 with a $204 million surplus.

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

"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 to support those important on-going investments," O'Malley said, adding that the "Doomsday budget" was $71 million out of balance.

O'Malley said the special session will focus solely on the budget. The legislature will likely take up expanded gambling and a possible sixth casino for the state in Prince George's County in a session later this summer.

Increased gas taxes or an additional penny on the sales tax to go to transportation projects will also be considered at a later date, the governor said.

As part of the budget package under consideration, O'Malley said the state will make almost $600 million in additional cuts to the budget. Those cuts will be made to the current year's spending and in the budget year that begins July 1.

State budget Secretary T. Eloise Foster said the budget contains $247 million in additional revenues through increases in taxes and elimination of exemptions.

Under the proposed budget plan, taxpayers filing individually who makes $100,000 annually will see their tax rate increase from 4.5 percent to 5 percent.

Individuals making between $500,000 and $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.

O'Malley said the plan will also contain a shifting of a portion of the teacher pensions 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 that shift 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."