ANNAPOLIS — The General Assembly gave final approval early Wednesday afternoon to a budget package that will raise taxes on the wealthiest Maryland residents and shift the cost of teacher pensions to local jurisdictions.
The tax package, which did not pass in the waning hours of the legislature’s regular session which ended last month, is expected to generate more than $261 million in revenue for the state. The pension bill would save the state more than $227 million.
Gov. Martin O’Malley and legislative leaders agreed to hold a special session this week to enact the tax and pension measures and avoid more than $500 million in budget cuts.
Perhaps the most controversial component of package is an income tax hike on individuals earning more than $100,000 and couples earning a combined $150,000 or more.
About 13 percent of Marylanders will pay higher taxes as part of the deal, which was finalized when the House of Delegates gave the pair of bills final approval after a three-hour morning session.
The bill, SB 1302, also limits some personal tax exemptions, applies the recordation tax to indemnity mortgages and repeals the corporate income tax credit for state and local property taxes paid on certain telecommunications property.
The indemnity mortgage measure also drew the ire of Republican lawmakers in both chambers, who said such mortgages are a “tool for small businesses” trying to expand. Under an indemnity mortgage, a lender agrees to loan money to a borrower if a third party guarantees repayment of the loan and then executes a mortgage on real property.
Democrats called indemnity mortgages a tax loophole through which borrowers could establish a limited liability company and avoid paying the recordation tax, which is a fee charged to record a mortgage or deed.
The pension bill, SB 1301, shifts teacher pensions and makes other cuts to Gov. Martin O’Malley’s original fiscal 2013 budget, including about $80 million in reductions to Medicaid.