In Md., big tax cuts for those who need them least – Baltimore Sun
A package of income tax cuts passed by the state Senate got a boost this week when Gov. Larry Hogan urged their passage as the legislature wraps up its business in the coming days. Though they differ from the assorted tax breaks the governor had included in his legislative package, he said they have his “full support.”
That may not be surprising, as Mr. Hogan never met a tax cut he didn’t like, and the promise that the cuts would help virtually all Marylanders may sound appealing. But the truth is that the proposal helps wealthy Marylanders a whole lot more than anyone else, and in the process it could make it more difficult for the state to afford investments in education, infrastructure and other key needs. The bill grew from a laudable proposal to provide tax relief for the working poor, and we urge the House of Delegates to strip it back down to its original form.
The bill has three parts. The first is the expansion of Maryland’s Earned Income Tax Credit — an idea with strong bi-partisan support. The second is a modest increase in the personal exemption for Marylanders with federal adjusted gross income of $100,000 or less. (Or $150,000 for married couples filing joint returns.) And the third is a reduction in marginal income tax rates for individuals making more than $100,000 or couples earning more than $150,000.
The EITC expansion could make a real difference for people struggling to get by. It expands eligibility to childless adults under the age of 25, increases the maximum benefit for that group and increases the income level at which the credit phases out. It would be worth as much as $366 extra per year for someone working full time at minimum wage. And because those who make so little tend to spend virtually all of their earnings, the money is likely to be immediately recirculated in the local economy. When fully implemented, the expansion would cost the state about $69 million a year.
But the real problem in this bill is the cut in income tax rates for top earners, which would cost the state nearly $130 million a year when fully phased in. Though it affects families who likely don’t consider themselves rich, its biggest benefits go to those who are. A married couple with adjusted gross income of $175,000 a year would save a pittance — $31.25 a year. But a couple earning $1 million would save nearly $1,400. The Maryland Center on Economic Policy, a progressive think-tank, calculated that 27 percent of the benefits of the total tax package would go to the top 1 percent of Maryland earners — that is, people making more than $1.6 million a year.
