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Income tax fight looms

ANNAPOLIS — A Senate panel’s plan to raise the state income tax is out of touch with working class Marylanders, chamber Republicans say, foreshadowing what could be a bitter debate on state spending this week on the Senate floor.

State Sen. E.J. Pipkin, R-Upper Shore, the Senate minority leader, said the committee had the chance to propose a budget bill that would rein in state spending without increasing taxes to close a $1.1 billion deficit, but chose not to do so.

“That opportunity appears to have been missed,” Pipkin said. “What came out is out of touch with the working families of Maryland.”

In an 8-3 vote, the Budget and Taxation Committee instead approved SB 523, which would increase the state income tax in the top four brackets by one-quarter of a percent.

All three Republicans on the Senate panel opposed the tax increase, which replaced a proposal by Gov. Martin O’Malley that would have capped mortgage interest tax deductions for those who make more than $100,000 annually — about 20 percent of the state’s population.

The Senate is expected to begin the floor debate Wednesday morning, and Pipkin said Republicans would not have much to say in support of the proposal, which calls for the state to increase taxes rather than make cuts to live within its present means.

“People sent us here [to curb spending],” Pipkin said. “They’re fed up with the tax-and-spend policy.”

Pipkin and other Republicans had hoped to stop the state spending from increasing and state Sen. David R. Brinkley, R-Carroll and Frederick, unsuccessfully led a charge to stop tax increases from leaving the committee.

Now, Republicans will have to seek the aid of conservative Democrats to prevent the tax increases from passing in the Senate.

The Senate panel agreed to balance cuts to education and health spending with the income tax hike and an increase in taxes on tobacco products other than cigarettes to realize about $600 million in savings for the state as part of the effort to close the $1.1 billion shortfall.

A so-called “Doomsday Budget” scenario, which proposed closing the deficit using exclusively cuts with no new revenue streams, was averted for the moment. But the option is still on the table, state Sen. Nathaniel J. McFadden said, should the income tax hike and a partial shift of teacher retirement pensions to local jurisdictions fail on the floor.

Senate President Thomas V. Mike Miller, D-Calvert and Prince George’s, said he hoped a majority of the chamber could find a way to rally behind what he called a “very reasonable” proposal.

“Compromise is not a dirty word in politics,” Miller said. The plan that left committee tried to fairly distribute the impact on state services and Maryland taxpayers, he said.

The increase in the state income tax effectively rolls back cuts made in 1997 by former Gov. Parris N. Glendening. But Miller said that most Marylanders would still pay less income tax than they did then because of other tax credits that have been enacted.

Raising the income tax was more palatable than making deeper cuts to education and state services, he said.

With none of the chamber’s 14 Republicans likely to vote for the proposal, Miller must gather the 24 votes needed to pass a bill from the chamber’s 33 Democrats to send legislation to the House of Delegates. The General Assembly has a self-imposed deadline of April 2 to pass a budget.

“We need to move bills out of the Senate,” Miller said.