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Testimony before the Budget and Taxation Committee
SB 249 - State Individual Income Tax - Millionaires' Tax
Position: The Maryland Public Interest Group supports the passage of SB 249, increasing the State income tax rate for an individual to 6.25% of Maryland taxable income in excess of $1,000,000; requiring the Comptroller to waive specified interest and penalties for the 2012 calendar year; and applying the Act to taxable years beginning after December 31, 2011.
Maryland is Suffering from Budget Cuts
Over the past five years, Maryland has cut spending by $7 billion. Despite the massive cuts in spending, the state’s current deficit is still roughly $1 billion. Maryland can address this deficit in one of two ways: continue cutting deeper into funding for essential services like education and transportation, or raise certain tax rates to increase state revenues.
The Wealthy Have a Relatively Low Tax Burden
The average household income in Maryland is roughly $35,000 annually. These households pay a tax rate of 4.75%. The state tax rate for taxable income over $1 million is currently 5.5%. This means that millionaires are paying a relative 1.25% more taxes on incomes at least 2,800% higher.
SB 249 would return tax rates on the highest income residents of Maryland to the same rate from 2010, 6.25%--an increase of only three fourths of a percent. Furthermore, the tax increase would only affect about 5,000 Marylanders, less than 1% of Maryland residents. According to the Comptroller’s office, raising the tax rate by only 0.75% would increase state revenues by $96.7 million in tax year 2012 and by $103.5 million in tax year 2013.
While there is some concern over the tax adjustment’s impact on Maryland small businesses, the bill’s fiscal and policy note makes it clear that a business would only experience increased tax rates if its taxable revenue could be divided amongst all of its owners and total above $1 million for each one.
Maryland has already cut billions of dollars in spending, but the deficit is still far from being closed. The state needs more revenue, but Maryland’s low to moderate income families cannot afford to pay more. Revenue burdens should be distributed according to recognized principles such as who uses, who benefits, and who has the ability to pay. At a minimum, government revenue sources should not increase income inequality among state residents. States should analyze the distribution of taxes and the incidence of new proposed taxes. For these reasons, Maryland PIRG supports the passage of SB 249 and requests a favorable report.
 AFL-CIO: http://md.aflcio.org/5020/index.cfm?action=event&eventid=ff68f604-3749-4... a745-73c25948729f
 Center on Budget and Policy Priorities: “States Continue to Feel Recession’s Impact”
 ITEP, “Five Reasons to Reinstate Maryland’s ‘Millionaires’ Tax’
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