Maryland’s House is expected to give final approval Wednesday to a budget plan that would raise income tax rates for high-income Marylanders and undo the so-called “doomsday” cuts that were set to go into place after lawmakers failed to reach a spending plan compromise during the regular session.
The Senate passed the spending plan early Tuesday afternoon, and the House is scheduled to take a final vote Wednesday morning. House Speaker Michael E. Busch (D-Dist. 30) of Annapolis said Tuesday evening that he expects a majority of delegates to approve the plan.
The two budget bills introduced by Gov. Martin O’Malley (D) create a $35.5 billion fiscal 2013 spending plan, which represents a 2.7 percent increase over fiscal 2012 spending.
The bills contain provisions to raise taxes on income and tobacco products and apply the indemnity mortgage tax to businesses.
The compromise income tax plan would raise $195.6 million in state revenue in fiscal 2013 through income tax hikes and $51.7 million by phasing out personal exemptions. The tax changes would affect single Marylanders making an adjustable gross income of more than $100,000 per year and couples claiming more than $150,000.
About 13.7 percent of Marylanders will pay more under the plan, according to a Department of Legislative Services analysis. The average increase in the state and local tax bills for those affected would be $579.
County governments across the state would see an additional $31.4 million in revenue as a result of the income tax adjustments in fiscal 2013, according to a fiscal analysis.
That revenue will help to offset a provision to shift 50 percent of the “normal cost” of teacher pensions, or $136.6 million, to counties beginning in fiscal 2013. The normal cost of pensions is the amount needed to pay pension liabilities if the system hadn’t been underfunded in the past.
The shift is front-loaded and will increase to 100 percent of the total normal costs in fiscal 2016. The same shift provisions were agreed to by House and Senate budget negotiators before the end of the regular session.
In floor debate, a group of Montgomery Democrats introduced an amendment that would strike the income tax increase and instead add a penny to the state’s sales tax.
Several other amendments, including some that would have restored personal exemptions and scale back the revenue measures in the bill also failed.
Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach said he will seek a change to the General Assembly’s rules to require lawmakers to pass a budget seven days before the end of future sessions; if lawmakers don’t meet that deadline, additional bills would not be considered until a budget deal is signed, Miller said.
“The last day of session should never have happened,” Miller said.
The special session could cost about $25,000 per day, according to the Department of Legislative Services. Miller has asked lawmakers who live close enough to commute to go home each night to reduce the cost of overnight hotel reimbursements and other stipends, if possible.