ANNAPOLIS — A nascent Senate proposal to cut taxes in Maryland is being met with cautious optimism by some lawmakers and Republican Gov. Larry Hogan.
The first hint of a possible tax cut came Monday night as state senators got their first look at how the Senate Budget and Taxation Committee amended Gov. Larry Hogan’s second budget proposal. Full details are not available, but the chairman of the committee said that a package would likely include a combination of personal income tax reductions and changes to the state’s Earned Income Tax Credit.
“It sounds good, it sounds great,” said Douglass Mayer, a Hogan spokesman. “As long as it’s a real tax cut — a tax cut that really lowers taxes and not a tax cut that raises others around the barn door.”
The Senate will take up a preliminary vote on Hogan’s $17 billion budget on Wednesday. Sen. Edward J. Kasemeyer, chairman of the Senate Budget and Taxation Committee, said a package of tax cuts could be ready for public release as soon as next week — roughly three weeks before the end of session.
“We’re trying to do something that will have a positive impact on everybody, so we’re looking at tax rates in combination with the Earned Income Tax Credit,” Kasemeyer said in a brief interview following the Senate session Monday night. “The two together, we think, will help.”
Kasemeyer estimated that the price tag of a cut could come to about $50 million to $60 million.
“We don’t want to look like we’re spending too much and look like we’re not responsible and keep it within a four- or five-year period,” Kasemeyer said.
There are a number of potential options for such a package, including an acceleration of the tax credit for low-income workers, reductions for senior citizens, and reductions to the personal income tax rate.
One bill, sponsored by Sen. Andrew A. “Andy” Serafini, that likely would not be part of the plan would phase in a 10 percent reduction of personal income tax rates, which would also affect many small businesses.
Senate Bill 124 would reduce state revenues by more than $151 million in the first year and nearly $800 million by the time it is fully phased-in in fiscal 2019.
Serafini, a Washington County Republican, said he still supports his bill but understands some legislators may see is as ” too much, too fast.”
Some bills in contention for becoming part of the package include a measure that accelerates the phase-in of a previously approved increase in the Earned Income Tax Credit. A bill sponsored by Sen. Richard S. Madaleno Jr., D-Montgomery County and vice chairman of the Senate Budget and Taxation Committee, and a proposal by Gov. Larry Hogan are more similar than not and represent a reduction of state revenues of about $15 million.
A reduction for retirees could also be a consideration.
Earlier this year, Hogan proposed a phase-in of a $5,000 exemption for persons 65 and older as part of his proposal to reduce taxes and fees by $480 million over five years.
“I would also advocate for something across the board,” said Serafini said. “You had Moody’s Analytics and Augustine (Commission) saying the middle class is the one that in our state gets hurt,” Serafini said. “It’s going to have to be modest.”
In October, Moody’s Analytics released a report conducted at the request of the Augustine Commission, which was established by House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr. In that report, Moody’s identified the personal income tax rate, which includes a local piggyback tax not applied by county governments in other peer states, as one of Maryland’s biggest competitive challenges.
Serafini said such an across-the-board cut might be no more than “1 or 1.5 percent across each bracket. Something very modest.”
“It’s a turn,” Serafini said. “Metanoia is a slight turn —it’s a Greek term — it’s not a full 180, but if we could just get a turn I think it’s going to be something hopefully we can get everybody behind.”
Talk of potential tax reductions is not new. Gov. Larry Hogan has said over the last two years that he is interested in finding a way to reduce taxes once the state is on firm fiscal footing.
Last week, Comptroller Peter V.R. Franchot said recent state revenue figures would allow him to support “a modest tax cut.” He did not define what such a reduction might include or cost.
In November, Miller, the Senate’s top Democrat, signaled his interest in reducing personal income tax.
“At the end of the day, the governor doesn’t care whose name is on the bill or if it is a Democrat or Republican,” Hogan spokesman Mayer said. “The governor views discussions like this and forward momentum like this as tremendous progress.”