The Budget: while the details (including the actual bills) are not yet available, according to press reports the Governor’s FY13 budget will include higher personal income taxes for taxpayers with incomes in excess of $100,000 for individual filers and $150,000 for joint returns. The increases will come in the form of reduced personal exemptions and caps on personal deductions. The increase will be effective for the 2012 taxable year.
It is estimated that the personal income tax increases along with taxing certain internet sales would generate an additional $300 million per year in State general fund revenues and $111 million in local government piggyback income tax revenues. There is an estimated $1 billion projected general fund shortfall and these increases are intended to help fill that gap.
Also, Governor O’Malley is proposing shifting to county governments roughly $240 million per year in costs for K-12 teachers’ pensions. The State currently pays 100% of those costs while counties pay 100% of the costs for teachers’ social security and Medicare. Under his proposal, the State would pick up 50% of the social security costs for a net savings of $240 million to the State. (Note: the shifting of $240 million in pension costs to local governments may result in property tax increases.)
In addition, the Governor is expected to soon introduce legislation to increase the State’s current 23.5 cents per gallon gasoline tax by as much as 15 cents per gallon.
R&D Tax Credit Cap Increase: Soon legislation will be introduced, at MAM’s request, to increase the cap on the R&D tax credit program from $6 million to $18 million. Sen. Nancy King, who serves on the Sen. Budget & Taxation Committee, will introduce the bill in the Senate. Delegate Kumar Barve, House Majority Leader and ranking member of the House Ways & Means Committee, will introduce the bill in the House.
For those MAM members receiving the R&D tax credit, the annual credit amounts should triple if the cap is increased to $18 million.
Tax Credits & Exemptions Under Attack Again: Delegate Bill Frick (D – Mont. Co.), chair of the Revenue Subcommittee of the House Ways & Means Committee, has promised to reintroduce his bill from last year to repeal a wide range of business tax credits and to subject them to detailed review before legislation could be introduced to reinstate them. At the 2010 session HB 620 passed the House and died late in the session in the Senate Budget & Taxation Committee. The Fiscal & Policy Note for HB 620 outlines the credits and the approach taken under the bill.
MAM was a lead opponent on HB 620 last year and we will strongly oppose a similar bill this year. The basis for our opposition is that many of these credits currently have sunset dates like the R&D credit which is scheduled to expire in 2020. (Its sunset date was extended at the 2010 session and Delegate Frick voted for that extension.) We have no objection to a thorough review of the program at any time; however, we strongly object to terminating the program in 2015 (as called for in HB 620 of last year) instead of the scheduled sunset date of 20/20. This earlier termination will result in uncertainty within the business community as to the stability of the program.
Stay tuned to further developments.
