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Legislators, advocates press for $2.2 billion tax package for Kirwan

Del. Stephanie Smith, D-Baltimore City (The Daily Record / Bryan P. Sears)

Del. Stephanie Smith, D-Baltimore (The Daily Record / Bryan P. Sears)

ANNAPOLIS — Legislators and a union-backed coalition of education advocates are proposing a tax package of nearly a dozen bills they said will help pay for the state’s portion of the proposed Kirwan Commission education plan.

Lawmakers are expected to grapple this year with finding a long-term funding source to pay for the state’s portion of the public school funding proposal that will cost $4 billion annually once it is fully phased in over 10 years.

Supporters of the proposals estimate their plans would immediately generate $1.4 billion through changes to the tax code for LLCs, capital gains, and tax increases to so-called higher-income earners.

Del. Stephanie Smith, D-Baltimore, said three years spent developing the Kirwan recommendations, which includes measures designed to close the achievement gap between black and white students, requires financial backing from the proposed tax changes.

“We didn’t do all of this to envision a brighter future for young people to deny it because we don’t have the gumption to do the right thing,” said Smith, who is sponsoring a proposal to increase the tax rate on those earning more than $500,000.

The package of 10 House bills comes a week after Senate President Emeritus Thomas V. Miller Jr. and Senate President William “Bill” Ferguson introduced legislation that would impose a tax on internet advertising. That proposal is expected to generate at least $100 million, according to a spokesman for Ferguson.

The House package proposed by Smith and others takes a broader approach they said is backed by a poll showing public support for raising taxes on the wealthy and on corporations.

The package includes a number of bills long sought by progressive Democrats in the legislature including:

  • Changes to how multistate corporations are taxed for profits earned in Maryland.
  • Closing what advocates call a loophole in the law that allows small business owners to have profits taxed at an individual rate rather than a corporate rate.
  • A 1% surtax on capital gains.
  • Restructuring of personal income tax brackets to lower rates for earners below the median income but increase rates on top earners, including a 7% bracket for millionaires.
  • Resetting the state exemption on estate taxes to $1 million from the current level of $5 million set in 2014.

The proposals also call for elimination of corporate tax credits deemed to be ineffective.

“Our tax code is upside down with the wealthiest 1% paying the smallest share of state and local taxes in relation to the rest of us,” said Del. Julie Palakovich Carr, D-Montgomery, who is sponsoring or co-sponsoring a number of the bills in the package. “It just isn’t right.”

Republican Governor Larry Hogan has praised some of the goals of the Kirwan Commission but at the same time leveled sharp criticisms of the panel’s work. He calls it “half-baked” because it failed to outline how to pay for the multibillion-dollar annual costs. Hogan has described the recommendations as budget-busting and said it would require massive increases in sales, income or property taxes — all of which he has vowed to opposed.

“Every one of us knows that to make Kirwan’s recommendations law, we need a source of funding,” said Sally Murek, a paraeducator in Montgomery County. “We have a source, and it’s not you or me.”

Murek said the call to choose between education reform or personal finances is “a false choice.”

“We ask for the most fortunate and least taxed among us top step forward and pay their fair share,” she said.

It is unclear how much support there is for the package from House Speaker Adrienne Jones or Ferguson. Jones has called for an elimination of outdated or little-used tax credits.

Neither presiding officer not leaders of the budget committees attended the news conference.

Ferguson and Jones have expressed a desire to avoid tax increases but said expansions of existing taxes may be considered.

Nikki Thompson, coordinator of the Maryland Fair Funding Coalition, expressed hope that the two legislative leaders will warm up to the proposals.

“There has definitely been conversations with leadership about this on the Senate side and the House side. We are giving them the opportunity and providing them the support they need in order to make this happen,” said Thompson.

 


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