Maryland lawmakers poised to approve retroactive tax hike

Tax Day may be a week away, but if you live in Maryland, you’d be wise to begin planning for what you’ll owe next April.

Maryland lawmakers, facing a Monday deadline to adjourn and a $1 billion budget gap to close, settled Saturday on the largest pieces of a tax package that would apply retroactively.

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If you make at least six figures — or with a spouse earn a combined $150,000 or more — the taxes being taken from your paychecks this year wouldn’t be enough to cover the bill you’d see in 2013.

Budget negotiators, however, appeared unlikely to decide until Monday on a Senate measure that could increase the taxes paid by almost every Marylander. Lawmakers left Annapolis late Saturday without agreeing on whether to reduce by $200 the annual personal deduction that can be claimed for each taxpayer and dependent and to phase out the benefit for high-income earners.

Also left unresolved Saturday was a decision over a measure that could amount to the largest expansion of gambling in the state since slots were legalized in 2007.

The package of tax increases and a plan lawmakers advanced Saturday to shift a share of teacher pension costs to counties are expected to plug nearly half of the state’s budget shortfall.

Depressed tax revenues since the recession and decisions by Maryland’s Democratic leaders to continue record spending on education and health care for the poor have contributed to a projected gap of nearly $1 billion annually for the remainder of the decade.

Gov. Martin O’Malley (D) and the General Assembly set out to fix half the problem this year, and it has proved no easy task. Lawmakers largely jettisoned O’Malley’s tax plan but are still finalizing their own. For the first time in five years, the assembly will head into the last day of its session, on Monday, with no final answers on the year’s spending plan.

Under the compromise between the House and Senate, the state’s tax rate on singles making at least $100,000 and couples earning at least $150,000 would jump to 5 percent from 4.75 percent. With local add-ons, the combined state-local rate would increase to 8.2 percent.

The rates would inch up thereafter, tying the District for the fourth-highest nationwide at a combined top rate of 8.95 percent for singles earning above $250,000 and couples making $300,000. Under previous proposals, the percentage increase would have been larger for those making $100,000 than those making a million or more.

The lengthy debate expected on the budget Monday threatens to crowd out decisions on hundreds of other bills. And some lawmakers said they were also concerned that the budget could be caught up in the emotional debate over bringing a casino to Prince George’s County and push both matters beyond the scheduled end of the session on Monday.

The House took no action Saturday on legislation that would authorize a full-fledged casino in Prince George’s, perhaps at National Harbor. The Senate, meanwhile, lapped the lower house on the issue: Senators crafted and approved, by a vote of 37 to 9, a new bill intended as a compromise.

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