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Maryland income tax more progressive? Define 'progressive'

July 29, 2007|By TIM ROWLAND

Here's an idea for people concerned about our rapid population growth: Raise the state income tax so high that no one will want to live in Maryland.

And make it progressive, so all the rich people in big, ugly houses will move out.

Actually, these potential eventualities are being peddled as the "down side" of tax reform, although it's hard to say why.

Seeking a tax avenue that hasn't, politically speaking, been entirely maxed out, state leaders are floating the trial balloon of an income-tax increase and marketing it under the banner of "making the tax code more progressive." That is, it's the wealthy who will pay.

Not being wealthy, I think it's a splendid idea. I just wish I could trust them.

Maryland's top tax bracket kicks in after your annual income exceeds $3,000. In other words, if you make more than $1.44 an hour, you enjoy the same rarefied tax rate as Dan Snyder and Peter Angelos.

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Truth be told, no one making much less than $8,500 has to file a return, so everyone is in Maryland's highest tax bracket - which was set in 1967.

Even adjusted for inflation, $3,000 in 1967 is $18,000 in today's dollars, so it wasn't as if the bar were set terribly high to begin with.

Needless to say, how this income-tax plan would affect you, individually, depends on where lawmakers would set the brackets and the rates. The consensus is that the rich would pay more, the poor would pay less and the rest of us - well, the deck isn't exactly stacked in our favor, is it?

Some things never change.

According to the Tim Parks book "Medici Money," 13th century Florence had two currencies: Florins were used by the wealthy, piccolo by the workers. That maintained social order. No matter how many piccolo a man might accumulate, that wealth did not bring with it entry into the upper classes, because he could not traffic in florins.

Today we have one currency, but those in the florinsphere, so to speak, enjoy greater access and influence with lawmakers through lobbyists and campaign contributions.

They also have math on their side. When Florence needed more revenue, it was the piccolo set that got hosed, simply because there were more of them. No matter how much you raise the rate on the wealthy, it is still the middle class that provides the bulk of the revenue, simply because of its greater numbers.

So while it's possible that Maryland lawmakers will change the tax schedules so that they affect the wealthy and not the rest of us, I wouldn't count on it. Money speaks for money, so the wealthy - understandably not wanting to shoulder all the burden on their own - will pressure lawmakers to reach lower down the income food chain for revenue.

And remember that nothing lends itself to shell games like taxation.

Maryland's last serious budget crisis in the early '90s was solved - ostensibly without major tax increases - by cutting state funding to counties. However, the counties were given authority to raise a share of the income tax themselves, which, of course, they did.

So state lawmakers overspent themselves into a crisis, then dodged the political piper by leaving the dirty work of raising taxes to local politicians.

A similar game played out nearly a decade later, when the "peasants with their pitchforks," as Pat Buchanan would have it, stormed Annapolis demanding tax relief, which at the time in the late '90s was part of a nationwide trend.

The General Assembly dutifully lowered income taxes and the satiated peasants returned to their hovels.

It almost goes without saying that the legislature did not mate this tax decrease to a corresponding decrease in spending. So in the ensuing years, the state raised every fee in sight, from motor vehicles to septic tanks.

The net result was that, courtesy of this tax cut, we all probably wound up paying more than if we had kept our mouths shut in the first place.

Again, this is not to suggest that making the state's income tax more progressive is a bad idea, if it's pulled off as advertised. Even if the state weren't facing a major budget shortfall it would still be good policy.

The quibble here is that an "easy" solution (politically speaking), such as raising taxes on the wealthy only encourages more irresponsible behavior in the future.

Once we solve this crisis is there any doubt we will find ourselves in another 10 years out?

One grows weary of arguing for cuts in state spending; it's like arguing with the sun to come up in the West. Further, when the state does cut (to the sounds of trumpets, as a general thing) the cuts are usually token, and they tend to affect small, disenfranchised interests - in other words, the very people who need government help the most.

The best that could be hoped for is that Annapolis would be honest with us. For example, when the state passed the far-reaching Thornton Plan for education, it would have been nice to hear this: "We believe education is critical to the future of the state. To compete on a global level we will need to spend an additional $1.3 billion - and here are the tax increases we will have to enact to pay for it."

Same goes for the current budget crisis: "We have spent ourselves into a hole, and to get out, this is is an accurate accounting of how much it will cost the taxpayers to get out."

When that happens, look for the sun to rise in the West.

Tim Rowland is a Herald-Mail columnist.

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