Lawmakers debate tax increases, teacher pensions

ANNAPOLIS, Md. – Frederick County senators Wednesday took opposite approaches to a budgetary package that would establish widespread tax increases and ask counties to take on millions of dollars in teacher retirement costs.

The state Senate on Wednesday spent hours debating a fiscal strategy favored by the Budget and Taxation Committee. The plan features broad tax increases and shifts responsibility for teacher pensions to counties more gradually than would the January proposal by Gov. Martin O’Malley.

Sen. David Brinkley was vocal in the discussion on the floor, rising in support of several amendments he said would prevent this year’s fiscal proposal from outsizing last year’s budget by more than $1 billion. While Sen. Ron Young, who also represents Frederick County, didn’t weigh in during the debate, his voting for the most part opposed that of Brinkley and aligned with the recommendations of the Senate budget and tax committee.

The committee’s plan would balance spending growth with broad increases to state income taxes. Supporters said the proposal paired fiscal responsibility with commitment to public services and schools.

With the plan, rates on all Maryland taxable income exceeding $3,001 would see increases ranging from .15 to .25 percent; a joint filer with federal adjusted gross income of $50,000 would have to pay $53 more under the plan.

The sweeping increases take the place of O’Malley’s proposal to limit income tax exemptions and cap itemized deductions.

Wednesday evening, the Senate voted 26-20 to amend the bill so it would apply a flat rate to individuals with Maryland taxable incomes above $500,000.

While rates for other taxpayers ramp up — starting at 2 percent on the first $1,000 of their taxable wages and increasing through the strata of their income — for these higher earners, the 5.75 percent rate would apply from the first dollar earned.

“This is one of the reasons someone chooses residency outside of the state,” Brinkley said, later adding that the flat rate would stunt growth of small businesses, which often file as individuals.

While Brinkley cast a “no” vote, Young backed the amendment.

Supporters of the flat tax argued it would affect only the highest earners and generate much-needed education funding.

Earlier in the day, Brinkley and Republican leaders fought for an alternative budget that would get rid of the need for tax increases by cutting funding for education, public safety and transportation.

“It takes this budget to last year’s level,” Brinkley said of the alternative to the Senate’s more-than-$35.8 billion budget.

The amendment failed by a 30-15 vote, with Young siding against it.

The Senate committee’s overall budget proposal comes in four connected bills. Failing to pass one bill in the series activates deep spending cuts that otherwise lie dormant in the budget.

With the current wording in the budget proposal, more than $262 million in reductions in funding for areas such as education and public safety would kick in if the legislature doesn’t approve a plan to split the cost of teacher pensions between the state and counties. Killing the tax increase bill would trigger an additional $427.7 million in cuts that would reduce higher education funding, shrink state agency budgets, eliminate 500 state positions and lower medical care provider reimbursements.

The Senate committee also advised shifting costs of teacher pensions from the state to county boards of education over a four-year period. Currently, the state foots the bill for pensions.

A number of state relief measures would cushion the transfer’s impact on counties, which would be required to cover the added expense to school systems.

In fiscal 2013, the first year of the transfer, Frederick County would pick up about $1.9 million in pension costs. But because the state offsets would more than cover the expense, Frederick County would come in ahead by $4.7 million.

Senate President Thomas V. Mike Miller Jr. said he hopes the Senate will make a final decision on the budget plan today.


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