Today’s Baltimore Sun reports that momentum is building in Annapolis for a plan to increase Maryland’s individual income tax on high wage earners. The bill, SB 1004 would establish two new rate brackets - 6 percent for income between $750,001 and $1 million and 6.5 percent for income in excess of $1 million.

Many lawmakers are promoting this tax increase as an alternative to the computer services sales tax set to take effect on July 1. While the Maryland Chamber appreciates the efforts of lawmakers seeking to build consensus for a plan to repeal the tech tax, it opposes trading one bad tax for another.

The proposed income tax increase would make Maryland’s top rate the 3rd highest in the nation at 9.7 percent, when you combine the state and local income tax rates.

“This income tax increase would serve as a disincentive for job creators to locate or expand in Maryland,” Maryland Chamber President and CEO Kathy Snyder said. “It would also make it more difficult for Maryland companies to attract and retain the highly skilled workers they need.”

In addition, many small businesses would be impacted by this rate hike. Thousands of Maryland businesses are flow-through entities, such as S-Corporations and Limited Liability Companies. These types of businesses don’t file corporate income tax returns. The tax on business income is paid on the personal income tax return of the business owners. Flow-through business owners pay individual income tax on all of the business’s net earnings, even the earnings the business owners reinvests in the business.

For more information on SB 1004, click here or contact Karen Syrylo at ksyrylo@mdchamber.org.