Because of the way Maryland’s tax laws are written, recent changes in federal tax law could lead to sharp increases in state taxpayers’ bills. The governor and leaders of the state legislature all say they plan to look for a way to cushion that blow, and the Democrats in the legislature revealed at a press conference Tuesday how they plan to do that.
The change likely to affect the largest number of Marylanders is Congress’s elimination of the personal exemption. Lawmakers say they plan to ensure taxpayers can still claim it at the state level, saving state taxpayers roughly $650 million a year.
Lawmakers plan to continue taxing estates after the first $5 million, rather than increase the tax-exempt portion to more than $11 million as Congress did.
And legislation sponsored by House Majority Leader Bill Frick would help residents reduce their federal taxes by creating a nonprofit fund to support K-12 education and school construction. In exchange for voluntary donations to the fund, taxpayers could get a state income tax credit.
Donors, Frick said, “may find that that is beneficial to them under the new federal treatment which caps your state and local tax deduction but leaves the charitable donations uncapped.”
Senate President Mike Miller said these efforts aim to protect middle-class taxpayers.
“360,000 Marylanders are going to be adversely affected by this bill,” Miller said. “The bill on Capitol Hill rewards corporations and rewards people in the 1 percent bracket and leaves the people in the middle class behind.”
Many of the details about how the Democrats’ proposals would work still need to be worked out. House Speaker Michael Busch said they will be by the end of the session.
“We got 85 days left, and we want to work on all three of these pieces of legislation to mitigate the problems that the federal tax bill has caused Maryland citizens,” Busch said. “We know a few specific things, but we don’t know everything.”
He said lawmakers are waiting to get full details on the impact of the tax changes from Comptroller Peter Franchot. Franchot’s office said he expects to have that information by the end of the month.
At his own press conference Tuesday, Gov. Larry Hogan said he is “thrilled” about the Democrats’ announcement.
“I had conversations with the president of the Senate and the speaker of the House as early as a week ago, and they were saying, we need all that revenue,” he said. “So the fact that they now agree with me that we’re going to protect taxpayers and keep them from getting that tax increase, I mean this is — I’m ready to throw a party.”
Hogan said he expects taxes to be the primary topic of conversation at a breakfast meeting Wednesday with legislative leaders. He said he plans to reveal his own tax plan soon.