The Senate Budget & Taxation Committee and House Ways & Means Committee heard the personal income tax rate increase proposal yesterday.

The proposal would increase the individual income tax rate for individuals earning more than $150,000 per year and couples earning more than $200,000 per year:

• From 4.75% to 6% for individuals earning between $150,000 and $500,000 and couples earning between $200,000 and $500,000
• From 4.75% to 6.5% for individuals and couples earning more than $500,000 annually.

Maryland Chamber State Taxation Consultant Karen Syrylo, CPA, outlined the Chamber’s opposition, stressing the proposal’s potential negative impact on Maryland’s competitive posture.

“Tens of thousands of small businesses in Maryland pay the personal income tax, because the business is in the form of a ‘flow-through entity’ such as a partnership, limited liability company, S-corporation, or proprietorship,” Syrylo said. “They don’t file corporate income tax returns. The tax on the business income is paid on the personal income tax returns of the business owners.”

In addition, Syrylo said that passage of this proposal would make it more difficult for Maryland companies to attract and retain the highly-skilled workers they need. When you factor in the local piggy-back rates, the rate change would make Maryland’s top marginal rate in some Maryland counties among the highest in the country.

“Maryland’s current combined tax rate of 7.95 is already high, the 10th highest in the nation,” Syrylo said. “This change would make Maryland’s total tax rate the 3rd highest in the entire nation, behind only California and Rhode Island.”

To view the Chamber’s complete position statement, click here.