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Washington Co. lawmaker seeks flat income tax of 4.51% for all in Md.

March 19, 2013|By KAUSTUV BASU | kaustuv.basu@herald-mail.com

ANNAPOLIS — A bill introduced by Del. Andrew A. Serafini, R-Washington, in the Maryland General Assembly seeks to change the state’s tax policy significantly, by proposing a state flat income tax of 4.51 percent on federal gross adjusted income for all Marylanders.

“The bill is revenue neutral,” Serafini said, meaning that the state would raise approximately the same amount of revenue from the new proposal as under existing tax laws if the bill were to become law.

Federally gross adjusted income refers to income earned after deductions such as student loans and some types of expenses.

It would also remove the county piggyback tax, but counties would get a share of the revenue from the new tax structure.

Serafini said Tuesday that the bill was a way of building “interest in the issue” and seven other states — Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania and Utah — have a flat tax system.

“Instead of using taxes as a carrot to drive things, everybody pays the same ... that’s what they do in Pennsylvania,” he said.

Serafini acknowledged that if his bill “starts to get legs” it would face strong opposition although no one testified against the bill at a committee hearing last week.

“Everybody and their brother who are getting special treatment” would not like the bill, Serafini said.

He pointed out that those in higher income brackets rarely pay the current rate of taxes.

“They are using deductions and credits to lower their taxes,” Serafini said.

Herman Cain, a presidential hopeful in the 2012 elections, is a flat tax proponent, so is Jerry Brown, the governor of California.

Critics of flat tax proposals have said that it could lead to greater income inequality.

According to a general explanation of flat tax systems by Len Burman, a professor of public affairs at Syracuse University, on the website of the Tax Policy Center, a nonpartisan group, a flat tax “inevitably exempts most of the income of high-income people from tax. If it is going to raise the same amount of revenue as the current system, it must raise somebody else’s taxes. That would be low- and middle-income people.”

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Serafini said that a flat tax would lead to simplicity and fairness.

“In some situations, the wealthy would pay more tax,” Serafini said.

The bill as originally filed suggested a 4.75 percent flat tax, but that was amended to 4.51 percent.

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