As Republican delegates railed against the proposed state income tax hike Wednesday afternoon, a lone freshman Democrat from one of the most liberal and affluent districts inside the Capital Beltway got up to explain why she too could not vote for the taxes.
“I believe this discriminates against two-income families with children at home,” said Del. Ariana Kelly, a Bethesda mom with two young children at home.
The State and Local Revenue and Financing Act raises state income tax rates by .25% to .50% for joint returns with more than $150,000 in Maryland taxable income — a 5% to 15% increase in the rate. And the law reduces personal exemptions for these couples, totally eliminating them for couples with more than $200,000 in federal adjusted gross income. This raises both state taxes and the local piggyback income tax.
“We are not talking about people sitting on great piles of money,” Kelly said. “Kids are extremely expensive.”
Increasing the marriage penalty
On her personal website, Kelly explained her opposition further.
“In current tax law, married Marylanders pay a higher tax rate than their single colleagues in the exact same jobs starting at a household income of $200,000. This is known as a ‘marriage penalty,’” Kelly said.
“By changing the tax brackets, this legislation expands the higher marriage penalty tax rates to affect couples earning $150,000 (for example, a husband and wife who each earn $75,000). This makes absolutely no sense to me, because when both parents are working, household expenses, including childcare, are higher, not lower.”
In addition, the highest marginal tax rate of 8.95% — including the county piggyback — will now be applied to married working parents who together earn more than $300,000, but not to a single person living on $250,000.
Impact of exemptions
The change in the personal exemption had a similar impact, Kelly said.
For families with a combined income of more than $150,000, “this amounts to a flat fee per child between $53 and $107. A family of four with a combined income of $150,000 will pay $394 in new Maryland taxes thanks to this exemption phase-out. However, a single man making $150,000 will pay only $104. A single millionaire will pay only $53 extra. Even if that millionaire had a wife and two kids, they would pay only $212 in new taxes from this exemption phase out.”
“This part of the tax plan brings in $82 million, almost entirely from middle-class families with two working parents and dependent children,” Kelly said. Based on data from the comptroller’s office, “I believe that 78% of the estimated 300,000 tax filers affected will have incomes under $250,000; 85% will have two working spouses and 70% will have dependents at home.”
These are particularly relevant numbers in District 16 in Bethesda. According to 2000 Census figures, 40% of the families there had household incomes of $150,000 and above, and 25% had incomes of $200,000 or more.
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