Progressive delegates objected to the income tax hikes too

May 18, 2012 at 7:59 am

By Len Lazarick
Len@MarylandReporter.com

As Republican delegates railed against the proposed state income tax hike Wednesday afternoon, a lone freshman Democrat from one of the most liberal and affluent districts inside the Capital Beltway got up to explain why she too could not vote for the taxes.

Del. Ariana Kelly talks to a radio reporter.

Del. Ariana Kelly talks to a radio reporter.

“I believe this discriminates against two-income families with children at home,” said Del. Ariana Kelly, a Bethesda mom with two young children at home.

The State and Local Revenue and Financing Act raises state income tax rates by .25% to .50% for joint returns with more than $150,000 in Maryland taxable income — a 5% to 15% increase in the rate. And the law reduces personal exemptions for these couples, totally eliminating them for couples with more than $200,000 in federal adjusted gross income. This raises both state taxes and the local piggyback income tax.

“We are not talking about people sitting on great piles of money,” Kelly said. “Kids are extremely expensive.”

Increasing the marriage penalty

On her personal website, Kelly explained her opposition further.

“In current tax law, married Marylanders pay a higher tax rate than their single colleagues in the exact same jobs starting at a household income of $200,000. This is known as a ‘marriage penalty,’” Kelly said.

“By changing the tax brackets, this legislation expands the higher marriage penalty tax rates to affect couples earning $150,000 (for example, a husband and wife who each earn $75,000). This makes absolutely no sense to me, because when both parents are working, household expenses, including childcare, are higher, not lower.”

In addition, the highest marginal tax rate of 8.95% — including the county piggyback — will now be applied to married working parents who together earn more than $300,000, but not to a single person living on $250,000.

Impact of exemptions

The change in the personal exemption had a similar impact, Kelly said.
For families with a combined income of more than $150,000, “this amounts to a flat fee per child between $53 and $107. A family of four with a combined income of $150,000 will pay $394 in new Maryland taxes thanks to this exemption phase-out. However, a single man making $150,000 will pay only $104. A single millionaire will pay only $53 extra. Even if that millionaire had a wife and two kids, they would pay only $212 in new taxes from this exemption phase out.”

“This part of the tax plan brings in $82 million, almost entirely from middle-class families with two working parents and dependent children,” Kelly said. Based on data from the comptroller’s office, “I believe that 78% of the estimated 300,000 tax filers affected will have incomes under $250,000; 85% will have two working spouses and 70% will have dependents at home.”

These are particularly relevant numbers in District 16 in Bethesda. According to 2000 Census figures, 40% of the families there had household incomes of $150,000 and above, and 25% had incomes of $200,000 or more.

 

Del. Kirill Reznik

Del. Kirill Reznik

Another progressive objects

Along with Kelly, Del. Kirill Reznik, another Montgomery County lawmaker who describes himself as a progressive, joined four other Montgomery Democrats who voted against both the tax hikes and the budget act, which shifted teacher pension costs to the counties.

On his blog, Reznik said, “I saw these bills as an unacceptable burden to our lower and middle class working families in Maryland.”

“As a vocal critic of the teacher pension cost shifts, I believe that this shift will force counties, particularly Montgomery County, to either increase property taxes, cut services to the community, or both.  The pension shift, coupled with the tax increases passed, put too heavy a burden on middle class families, especially those with children.  This was not a plan that increased taxes on the top 1%.  Rather, over 40% of Montgomery County residents will see a tax increase of one form or another from this plan, and I refused to vote for a plan that was not progressive.”

Families in Reznik’s District 39 in central Montgomery County had much lower incomes than those in Bethesda, according to the 2000 Census, with only 11% making $150,000 or more.

Opposite views on impact of tax hikes

Del. Kumar Barve

Del. Kumar Barve

The impact of the tax hikes was widely disputed. Another Montgomery County Democrat, House Majority Leader Kumar Barve, said the tax hikes amounted to $6.25 a week ($325 per year) for a married couple making $250,000, Barve said he and his wife would be paying an additional $4.88 per week and “I am willing to pay that price” to maintain state programs.

Citizens for Tax Justice said Maryland lawmakers were “bucking a national trend” to cut taxes, particularly on the wealthy. The bill “would also lessen the unfairness of a regressive tax system that allows Maryland’s wealthiest residents to pay less of their income in tax than any other group,” the group said, based on an analysis by the Institute for Tax and Economic Policy.

“Only 11 percent of Maryland taxpayers would face an income tax increase in 2012 as a result of SB1302,” the group said, though legislators were quoting a figure that placed it at 14%.

The group said 54% of the new income tax revenue would come from the wealthiest 1% of state taxpayers — a group with an average income of nearly $1.6 million per year.  Eighty-seven percent of the revenue would come from the top 5% of taxpayers.

Most of these higher-earning taxpayers could also take advantage of the “federal offset,” since they can write-off their state tax payments as deductions and receive a federal tax cut in return.

“Seventeen percent of the revenue raised by SB1302 — or $28 million in tax year 2012 — would come not from Marylanders, but from the federal government in the form of new federal tax cuts for Maryland taxpayers,” said Citizens for Tax Justice.

Tax Foundation disagrees

A report on Tuesday by Scott Drenkard of the Tax Foundation calculated that under the next tax bill, a dual-earner, two-child family with $250,000 in federal adjusted income living in Maryland would pay $989 more in state income taxes this year, a total of $17,775 compared to $16,612 in the District of Columbia and $11,651 in Virginia.

Drenkard concluded that “Maryland’s latest income tax increase proposal fails to meet the criteria of sound tax policy. By opting to raise taxes on high-income earners, the proposal seeks to raise taxes in a politically expedient way, but one which will have distortive long-term effects.”

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  • Pmccr42626

    I would hope that any decision that was made was based on hard data.  The state comptroller has the data on the income taxes paid by individuals in previous calendar years and should have the capability to calculate the impact of tax changes on individuals and families .  What is not clear is the long range impact of tax rate change on businesses or people relocating or staying in the state.  

    • abby_adams

      I agree. Franchot was a rabid liberal/progressive in his previous life. That was before he was privy to look at the state tax receipts figures!  The Dem majority in Annapolis COUNTS on ALL Dems to “go along” with the “grand plans” presented to them.  Call me skeptical, but we all knew that this “special” session wasn’t so “special”! The agreement for higher taxes was written before any state delegate or senator stepped foot inside the state house!  Too bad these MoCo county delegates didn’t wake up earlier to the CUMULATIVE effects of the tax hike and budget increases rather than tote the party line about “DOOMSDAY”.  Higher taxes, fees and tolls will be paid by ALL MD residents/taxpayers regardless their political affiliation! 

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  • abby_adams

    Our august leaders in Annapolis truly have little thought about the CUMULATIVE effects of the taxes they dump on MD. With an economy highly dependant on federally connected jobs, and looming cuts in the fed budget, increasing taxes on “high earners” might not generate the expected revenue. Do we cross our fingers and hope that gambling will make up for shortfalls?  Or maybe a third special session for more tax/fee hikes that will hit the 80+ percent of those who will escape this latest tax grab? It shows true courage or abject stupidity to INCREASE SPENDING and TAXES on taxpayers/business during a severe recession. As a MD native, I’m voting stupidity.

    • Dale McNamee

      As you wrote : ”  Or maybe a third special session for more tax/fee hikes that will hit
      the 80+ percent of those who will escape this latest tax grab?”

      It going to come because there are not enough “high earners” to pay for all of the “goodies” that are expected and demanded…

      Some of those “high earners” are small business owners who can choose to shut down and leave, leaving unemployed former employees,  a “triple whammy” of tax revenue lost due to the owner’s income tax, employees’ income taxes, the company’s tax no longer flowing in…

      But, the Legislature doesn’t think of such things because they are rewarded with re-election by the constituents  who don’t think of such things…

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  • Driver21225

    Okay I do believe higher wage earners should pay there share but not double that becuse your married. or is that why the state passed the Gay Marriage Bill so they can hit another group for double taxes.

    • Dale McNamee

      The “marriage penalty”  is never mentioned as one of the “benefits” of marriage. Just as alimony,child support, etc. aren’t…

      To the “same sex marriage” supporters, enjoy the privilige of being married …

  • Dale McNamee

    In this past Friday’s (05/19) Metro section of the Washington Times, there was an article that warned the reader that the tax for Transportation is not dead and might be brought back during the 3rd. “special session” (when called) or in 2013…

    Cue the sad violin music, the weepy-eyed cast of characters who will invoke “our children” to give legitimacy to this thievery…

    And let’s not forget the mantra : ” Infrastructure for the children ” … Just like ” education for the children “…

    Practice your breathing techniques as you chant these mantras…

    Ommmm…

    • Dale McNamee

      Also, remember to just “Believe”…

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  • Cwals99

    First, I would like to say that politicians from outside the beltway are not progressives, they are Third Way, which explains the comment from the Delegate in the article.  Maryland ranks in the middle of the country in taxes, if one looks at personal wealth rather than income, and that is where these beltway politicians have had it their way for too long.  Maryland is the wealthiest and has the most income inequality in the nation.  We need real progressive tax reform that addresses this wealth distribution by creating several brackets for taxing over $1 million in wealth. She is right in that this tax bill did not address this progression but rather gave a flat rate that hit the upper middle class as hard as the super-rich.  We need more work on progressive tax reform that extracts taxes from capital gains and dividends and closing corporate loopholes as well.

  • Cindy Walsh

    We must be aware that Maryland has Third Way corporate Democrats, not progressives. Third Way support some progressive issues, but they are corporate and as such work against the people.