General Assembly Weighs Tax Cut Options
Tax cuts and Maryland are not often words spoken in the same sentence. However, this session holds out the hope that there may be room for some taxpayer relief from a variety of tax proposals offered up by legislators, Governor Hogan and recommendations of a legislative study commission. With a projected FY 16 year end cash balance of over $500 million, state finances appear to allow for at least some marginal reductions in taxes and fees. Here are some of the major proposals:
· Governor Hogan’s Tax and Fee Recommendations – Governor Hogan announced a series of proposals to provide tax relief to retirees, small businesses, working families and manufacturers.
1. Seniors Tax Relief – Increase the individual income tax personal exemption for persons age 65 and older from $1,000 to $5,000 over four years.
2. Business Filing Fee Reduction – Reduce over four years the annual filing fee paid by business entities with their personal property tax return to SDAT from $300 to $100.
3. Increase Earned Income Tax Credit – Accelerate the increase of the state earned income tax credit from 26% to 28% of the federal credit amount.
4. Fee Rollback – An omnibus bill would reduce the fee charged for a variety of permits, applications, licenses and services.
5. Promote Manufacturing – Eliminate the state corporate income tax for 10 years on new manufacturers in specified areas of the state, and eliminate the state income tax for 10 years on individuals earning less than $65,000 employed by those manufacturers.
· Maryland Economic Development and Business Climate Commission Recommendations – Appointed by legislative leaders, and chaired by retired Lockheed Martin Chairman/CEO Norm Augustine, this commission spent a year evaluating ways to make Maryland’s tax system more competitive. Its recommendations will be seriously evaluated by the General Assembly this session:
1. Provide an individual income tax exemption for certain income of members of pass-through entities.
2. Accelerate the increase of the state earned income tax credit.
3. Reduce, over 3 years, the corporate income tax rate from 8.25% to 7%
4. Provide single sales factor apportionment for all corporations.
5. Do not adopt combined reporting for corporations.
6. Eliminate corporate income tax on repatriated overseas earnings taxed abroad.
7. Accelerate recoupling of state estate tax exclusion amount to federal estate tax amount.
8. Fund a modern, integrated tax collection system.
9. Rigorously evaluate tax incentive programs.
10.Provide sunsets on new tax credits.
11.Better analyze and track tax credits.
12.Reduce to the prime rate, over 3 years, the interest rate for tax deficiencies and refunds.
13.Institute private letter rulings for taxpayer guidance.
14. Reduce individual income tax burdens