INCREASING INEQUALITY, NOT REDUCING IT

Expansions to Maryland's Earned Income Tax Credit will significantly benefit low-income workers, but some legislators want to offset these benefits with additional tax cuts for the wealthy. 

A progressive and well-supported effort to improve the state’s Earned Income Tax Credit has had markedly different fates in Maryland’s House of Delegates (HB 1253) and the Senate (SB 840). 

However, the bill has now passed in the Senate and being considered as a cross-file in the House, having been loaded up with a Christmas tree of goodies for the wealthy in the form of tax breaks. 

In the Revenue subcommittee of the House Ways and Means Committee, the Senate version got a disconcertingly warm welcome March 31 from subcommittee chair Jay Walker, a Prince George’s Democrat who also chairs the county House delegation. Our observers say he pooh-poohed the idea that those with household income of $140,000 and up should be considered “wealthy” – that they should instead be aided in their life-struggle with a tax break that by some accounts would cost the state over a half-billion dollars in revenue over five years. 

That $140K-plus might be chump change to Jay Walker but it looks far out of sight to the low-income families who would be benefited by expansion of the EITC. The House should hold the line and strip the fat-cat tax breaks out of the bill. Progressive Maryland will fight this perversion of a progressive idea and urges all progressive Marylanders to do the same.

Both bills were originated by the leaders of each chamber. It is time for House Speaker Mike Busch to hew to the original intent of the bill – to decrease inequality, not to increase it.

 A sound and scathing analysis by Prof. David Lublin on his Seventh State blog shows how the Senate bill perverts the intent of the original bill, which was to raise up the incomes and prospects for low-income families and to extend some of those benefits to single individuals trying to get a start in life in what are still very difficult economic times.

This is another nasty side effect of the work of the Augustine Commission, a group put together by the Assembly’s two honchos to sidestep a genuine legislative approach to improving the state’s economy by diversifying away from military spending, then being severely cut by sequestration.

Instead, Senate President Mike Miller and House Speaker Mike Busch put together this panel – formally, the Maryland Economic Development and Business Climate Commission -- of distinctly non-low-income Marylanders to pursue their dream of a low-tax environment. It was headed by former Lockheed CEO Norm Augustine and stacked with businessmen. Not surprisingly, their idea of an attractive business environment was lower taxes on the wealthy (as opposed to, say, good schools for their children and the children of their prospective employees).

Gov. Larry Hogan, who has been urging these Augustine Commission tax breaks for his fans in the business community, will no doubt welcome the Senate bill with open arms and a ready pen. He shouldn’t be given the chance.

By Prof. Lublin’s assessment,

 “… people who earn $500K will see their taxes go down by $719, while people who earn $100K or less get no break. … The bill reduces the already modest level of progressive taxation in Maryland’s tax code. The largest gap in the marginal rates was only 1% between low and high income earners. That will decline to 0.85%... 

“Moreover, I don’t see why we need to give wealthy people significant tax breaks in order to increase the EITC. As the economy has picked up, the wealthy have seen the lion’s share of the benefit. Affluent Marylanders hardly need a break not only because they already have more but because they’ve gained a lot lately.

“In contrast, working and middle-class Marylanders have seen their earnings stagnate or decline.”

That bias in favor of the wealthy is embedded in the Senate bill, which was passed over the opposition of Sens. Ramirez, Muse, Rosapepe and Pinsky of Prince George’s County and Madaleno, Lee, Raskin and Manno of Montgomery.

The Senate bill should be repurposed, in a conference committee, to pursue only the original goal of a broadened and more effective EITC. The House should hold firm with it and insist the Senate knuckle under and stop giving away the store to those who already own it.