Most states have improved their financial condition coming out of the recession and so new taxes are generally off the table this year. Then there's Maryland. Here's another case of a failed tax increase on "millionaires."
Democratic Governor Martin O'Malley has acknowledged another $1.1 billion deficit for 2013 thanks to a $35.9 billion budget with about $400 million for new school construction, roads and transit. To close the budget gap and help plug a $16 billion unfunded liability in public-employee pensions, Mr. O'Malley is seeking to raise $180 million by reducing income-tax deductions and exemptions for those earning more than $100,000. This is Maryland's new definition of "rich."
Mr. O'Malley also wants to raise taxes on tobacco, nursing homes, Internet sales, water and sewers. One of his biggest revenue grabs is a proposal to apply the 6% state sales tax to gasoline, which over three years could raise the tax by 18 to 24 cents a gallon, up from 23.5 cents now.
If tax increases solved budget problems, Maryland would already be sitting on a mountain of cash. In 2007 Mr. O'Malley signed a "millionaire surtax" raising the tax rate to 6.25% on income of $1 million or more and to 5.5% on more than $500,000, up from 4.75%. Maryland cities impose piggyback income taxes of up to 3.5%, so the effective tax rate in Maryland soared to 9.75% in places like Baltimore. ... continued...