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House Democrats Pushing Tax Reform

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A coalition of Democrats in the House of Delegates has launched a drive for what they call a more equitable tax structure in Maryland. 

They have filed a series of bills that range from restructuring Maryland’s tax brackets so high-income earners pay more and lower-income earners pay less, closing what advocates call corporate tax loopholes and ending a tax exemption for estates greater than $1 million.

Del. Julie Palakovich Carr, of Montgomery County, says the state’s tax code allows the wealthiest Marylanders to pay a smaller share of their income than anyone else and these bills are an attempt to change that.

“I think it's especially needed in a year like this one, where the wealthiest Americans have added $1 trillion in assets and income through the stock market and through stock market gains this year,” she said. “We will make sure that they are paying their fair share towards state taxes.”

Two of her bills would raise taxes on income attributable to investment fund management and the sales of stocks and bonds, known as capital gains. Both are taxed at lower rates than regular wages.

A third would raise taxes on large companies—those with more than $1 million a year in profits—that are set up as Limited Liability Corporations, or LLCs, much like smaller companies do to take advantage of lower tax rates.

Palakovich Carr says that would help small businesses.

“Right now, our tax code does not differentiate between a small business that's an LLC and a very large and profitable company that's set up as an LLC in order to avoid corporate taxes.”

Other bills would reduce the amount of an estate exempt from taxation from $5 million to $1 million, restoring it to 2014 levels, and close loopholes that allow multi-state corporations to shield Maryland income in other states.

Del. Vaughn Stewart, a Montgomery County Democrat, says that bill is a reworked version of a bill that passed the House last year, but died in the Senate.

“The bill will generate about $60 million a year and crucially, it'll level the playing field for the thousands of small businesses in Maryland that don't have access to this massive loophole,” he said.

In fact, most of the bills are reworked versions of measures that have either died in committee in previous sessions or passed the House but ran into trouble in the Senate.

Del. Eric Luedtke, the House majority leader, says it’s too early to tell how they’ll do this year, though he argues that Maryland’s tax code is skewed the wrong way and “fixing it is a long-term project.”

He says given the emphasis on equity in his chamber during this session, some of the bills, closing corporate tax loopholes, for example, may have a chance.

“The members that are putting in these bills are starting exactly the conversation that we need to be having right now about our taxes,” he said.

Republicans, however, are unanimously opposed to tax code changes. Del. Kathy Szeliga, the House Republican whip, insisted in an appearance on WYPR’s On the Record last week that now is not the time to be talking about taxes.

“We're trying to find ways that we can help businesses keep their doors open,” she said.

And she argued that the large corporations the Democrats say will bear the brunt of the changes will merely pass the costs on to Maryland businesses.

Or worse, she warned, “they'll decide they don't want to operate in the State of Maryland.”

“That's happened in the past before,” she said. “So, we have to be very careful, tread lightly going forward.”

Del. Stewart says that won’t happen.

“There's been study after study to suggest that companies do not leave,” he said. “There's no diminished economic growth. There's no diminished jobs as a result.”

He said tax bill opponents will make that claim, but there is no evidence to support it. “They’re literally making it up.”

 

 

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