Senators Consider Repeal of Old Income Tax Cut to Fill Budget Hole


By Len Lazarick and Daniel Menefee, Len@MarylandReporter.com, Dan@MarylandReporter.com

ANNAPOLIS—A bill to roll back a 15-year-old income tax cut and raise all tax rates by a quarter of a percent (.25%) may be part of Senate strategy to avoid a “doomsday” budget of drastic cuts by generating $600 million in new revenue.

The bill proposed by Sen. Roger Manno, D-Montgomery, repeals a 1997 income tax cut “that greatly contributed to the budget deficit of today,” Manno said.

He confirmed that his bill, one of several tax hikes he has proposed over the years, is being discussed as an alternative to large cuts in Medicaid, school funding and other social programs.

“My goal is to work for a broad based, pragmatic, fair and palatable revenue solution that offsets cuts to education and social services which would be more than any of us could bear,” Manno said.

Another source familiar with ongoing backroom budget talks said the Manno measure might be offered as an option after the Senate Budget and Taxation Committee produces a “doomsday” budget chopping an additional $500 million from the governor’s spending plan that already contains $500 million in program reductions.

Manno presented his bill to the committee on Wednesday during a marathon hearing about the governor’s Budget Reconciliation and Financing Act, which makes several financial and policy changes. There was no discussion on his proposal.

Manno serves on B&T and said he would reluctantly vote for a doomsday budget to show what would happen without new revenues like his bill.

Senate President Mike Miller last week said senators were looking for an alternative to Gov. Martin O’Malley’s proposed tax hikes that include the elimination of some tax deductions, such as the mortgage interest deduction.

Miller said there was significant pushback against the change in deductions and exemptions for people making over $100,000.

Hundreds protest cut in mortgage deduction

That opposition drew several hundred people in the pouring rain to the State House Wednesday to protest the cut in the mortgage interest deduction. Chants of “save our mortgage deduction” and “not-now-not-ever” echoed through Lawyers Mall.

“If you have an adjusted gross income of $100,000 or more, you will lose 10% of your mortgage interest deduction,” said Ross Mackesey, a realtor with Long and Foster in Lutherville, Maryland. “If you make $200,000 your interest deduction is reduced by 20%.”

Mackesey said the loss of the mortgage Interest deduction will hurt distressed homeowners the most and stall the housing recovery. He also said households in Maryland making $100,000 should not be considered high earners.

Many Maryland households making $100,000 or more are still underwater in their mortgages because of inflated prices during the real estate boom in the early 2000s, Mackesey said.

“Reducing the mortgage deduction will make home ownership less attractive and put those homeowners further under water,” said Mackesey.

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