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Tax on the rich to be back on the table in 2012

Originally Published on Gazette.Net

Economic & Fiscal Policy

by Sarah Breitenbach, Staff Writer

MPPI IN THE NEWS

During a legislative session expected to be marked by a search for revenue, lawmakers are planning to resubmit a plan that would tax Maryland millionaires at a higher rate.

Del. Jolene Ivey said Monday she intends to introduce legislation that would reinstate a tax that until last year charged 6.25 percent on incomes of more than $1 million.

The tax rate, which had generated $120.5 million for the state from its inception in 2008 to the end of 2010, expired in January and returned to 5.5 percent for incomes of more than $500,000.

Reinstating the tax could generate $60 to $70 million in Maryland annually said Ivey, who previously submitted legislation that would have made the tax rate permanent.

“I believe that there’s more of a feeling that we need to do something, we’re against the wall,” Ivey (D-Dist 47) of Cheverly said. “The state needs money, and when you start looking around at who is most able to provide the money, it seems that millionaires are a good place to look. I don’t get calls from millionaires saying ‘Don’t tax me.’”

Ivey said she also would consider introducing a measure that, rather than increasing the tax rate, would eliminate some exemptions and deductions that people with million dollar incomes could use.

Maryland has the country’s highest percentage of millionaires — 7.22 percent of the state’s households, according to a report by the research group Phoenix Marketing International, a New York-based market research firm.

In recent years, Maryland has ranked second on the list behind Hawaii or New Jersey.

Ivey said she thinks there is support to tap into that wealth, as the state faces a budget shortfall of more than $1 billion next year.

“I’ve been speaking with some colleagues and with people who have to try to juggle the books in Annapolis, and they are open to the possibility,” she said.

Neil L. Bergsman, director of the nonpartisan research organization the Maryland Budget and Tax Policy Institute, said having exhausted other revenue sources and been forced to examine several tax options including a gas tax increase, lawmakers might be more receptive to levying higher taxes on millionaires than they have been in recent years.

“I think that as long as there were temporary measures to take, like transferring money from special funds, there was not the need to swallow hard and reinstate the million dollar tax bracket,” he said

Opponents of the higher tax bracket argue it drives wealthy people, who they say are responsible for job creation, from the state.

Christopher B. Summers, founder and president of the conservative-leaning Maryland Public Policy Institute, doesn’t think any taxes should be increased during the recession and said asking millionaires to pay more means wealthy people will change their residency or spend their money outside Maryland.

However, according to the Center on Budget and Policy Priorities, an organization that studies fiscal policy and public programs, migration from states that increase their tax rates is not common.

Migration is more likely to be driven by cheap housing options than lower taxes, according to a recent study published by the center.

Summers argues the budget shortfall could be solved with more cuts to state programs.

“The people who want to continue this, they don’t want to go to the table and make hard budget-cutting decisions that need to be made,” he said.

Sen. Roger Manno, who also has introduced legislation related to the millionaire’s tax, said he is not certain the General Assembly will get behind the proposal, but that tax increases will be part of the solution to the state’s budget woes.

“The question is whether there is support in the chamber for it,” he said “This new report [from Phoenix Marketing] is good for Maryland, for sure,” Manno (D-Dist. 19) of Silver Spring said. “It helps to rebut the argument that they’re leaving the state in droves, which we never thought was happening”