Md. Democrats cautiously weigh broad tax-cut plan

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ANNAPOLIS —  The leader of the Maryland Senate is holding out hope for passage of a tax relief package before the session ends in April.

The economic strain of a conflict in Ukraine layered on inflation growing at the fastest rate in 40 years has some lawmakers thinking about pocketbook issues. And while some tax proposals are being batted around, few so far would likely bring broad-based relief.

Senate President Bill Ferguson said the legislature is looking for ways to make Maryland a more tax-competitive place this year.”

“We’re in very intense conversations about what potential policies we can do,” said Ferguson. “We’re having a very comprehensive look at our tax code this year to see if, with a surplus, can we be financially sustainable and reasonable while also becoming more competitive with our tax brackets.”

Ferguson ticked off a small list of potential options including tax breaks for retirees and first responders. Ferguson did not initially include middle-class taxpayers but when asked appeared to hold out some hope.

Gov. Larry Hogan has called on lawmakers to cut taxes, offering his own $4 billion plan that would phase out state income taxes for retirees 65 and older who claim Social Security. He also is seeking an additional $600 million tax credit for low-wage earners who claim the earned income tax credit.

The Senate could move its version of the fiscal 2023 budget in the coming week. Ferguson hinted that some potential tax changes could be in that spending plan.

“What I’m hoping we see from conversations with the governor and the speaker and our budget leaders is a robust package that looks at this year’s budget and the next few years to keep us structurally sound over the shorter and longer term,” said Ferguson.

Maryland, as with the rest of the country, is dealing with both the ongoing pandemic and supply chain shortages and inflation for everyday goods. Already high gas prices are edging higher.

Nationally, the average price for a gallon of gas topped $3.84. The rate of increase hasn’t been seen since 2005. In Maryland, prices for a gallon are higher than the national average and approaching $4 per gallon.

“As we recover from the COVID crisis, Marylanders are sitting around the table thinking about their pocketbooks, their future and their health,” said Ferguson.

The Senate leader dodged questions about political liabilities — especially for Democrats — if the session adjourned without some effort to ease financial pressures on voters.

Midterm elections are historically difficult for the party that holds the White House. Issues involving taxes and the economy could favor a Maryland Republican party that won three of the last four gubernatorial elections.

This year, the state is looking at a multi-year surplus of over $4 billion, according to Democrats and the governor. But Republicans Friday quoted Comptroller Peter Franchot, who has put that surplus at closer to $6 billion.

Even so, Democrats are concerned about how such a large reduction in revenue could affect the budget.

“We have the Blueprint for Maryland’s Future (education plan), which is going to require significant funding,” said Ferguson. “We have one-time funding this year that could be put toward the payments in the out years. That’s an important benefit for middle-class Marylanders who send their kids to public schools.”

The blueprint, sometimes shorthanded as the Kirwan education plan, will pump billions into education reforms. A drawback of Hogan’s retiree tax cut proposal, for Democrats at least, is that the largest reductions come in the same year the most expensive portions of the education plan must be paid for. 

“We must be financially prudent,” said Ferguson. “We can’t do something because it’s an election year that will set us up for failure three years from now or four years from now where we face a fiscal cliff.”

House Speaker Adrienne Jones has called for targeted tax relief for lower income individuals and families.

In the last week the House has passed a number of sales tax exemptions on the sale of diapers and baby bottle nipples.

Republicans attempted to graft on an amendment to decouple the state’s gas tax rate from inflation. Under a law passed in 2012, the rate automatically increases each July to match the annual rate of inflation.

Ending the automatic increase would prevent an estimated $37.5 million increase in July. Republicans assert that estimate is low based on reported inflation rates in the last quarter of 2021 and for January.

Another bill passed by the House exempts oral hygiene products from the sales tax — a measure that will return less than $1 per year to the state’s more than 6 million residents.

Del. Kathy Szeliga, R-Baltimore and Harford Counties, mocked the bill and called it “gimmicky.”

“Good job. Glad we got this toothbrush sales tax relief bill passed here,” Szeliga said.