Maryland Governor Proposing Increases in Income, Sales, Gasoline, Cigar, and "Flush" Taxes

January 19, 2012

This week, Maryland Governor Martin O'Malley has proposed a series of tax increases.

Individual Income tax:

The tax increase is targeted at the 440,000 Maryland residents who filed state income tax returns last year declaring six-figure salaries or more.

The plan would halve the $2,400 personal exemption both for individuals making $100,000 to $125,000 annually, and for families making $150,000 to $175,000.

Above those amounts, the governor's plan would eliminate the baseline exemptions entirely. Personal deductions for those earners would also be capped.

Sales tax and gasoline tax:

Mr. O'Malley suggested increasing the tax from 6 percent to 7 percent as an alternative to a 15-cent increase in the gas tax that has been widely discussed by legislators but poorly received by many residents.

Cigar tax:

Tax on cigars and smokeless tobacco is 15 percent of wholesale, which was comparable to the 36 cents per pack cigarette tax in 1999.

The governor's proposal would make it 66 percent of wholesale, which would make it comparable to the present $2 per pack cigarette tax.

And the "flush" tax:

The governor has said he wants lawmakers to at least double the $30 annual "flush tax" on septic systems, as well as the monthly $2.50 fee on municipal sewer bills.

When O'Malley came into office in 2007, he attacked the recent budgetary spending spree. The budget that year stood at $29.2 billion. Rather than scale it back, however, he pushed through a tax increase package (four new top income tax brackets on high-income earners and an increase in sales tax from 5% to 6%). He let the very top tax bracket expire at the end of 2010 but is now obviously back asking for more. O'Malley's proposed 2013 budget is $36 billion-about a 13% increase in two years.

More on state tax policy here.

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