Maryland General Assembly nears final agreement on $1.5B bailout

Daily Record, The (Baltimore), Nov 19, 2007 by Andy Rosen

The Maryland General Assembly marched toward final agreement on a $1.5 billion fiscal bailout package Sunday night as it neared the end of a three-week special session.

The House of Delegates and the Senate completed work on a bill that would ask voters to approve 15,000 slot machines in Baltimore City, Anne Arundel, Allegany, Cecil and Worcester counties in 2008, and the Senate neared a final vote on an accompanying bill that would regulate the machines and set the distribution of the revenue they generate.

There were still some differences on a health care funding bill, and the Senate and House may yet have to meet in conference committee to settle the deal.

Earlier in the day, budget leaders from both chambers hashed out the many differences between two tax plans, clearing the way for a final agreement.

Under the plan, the personal income tax rate would get a top bracket of 5.5 percent - which matches the upper limit of a bill passed by the Senate. The top bracket would apply to earnings above $500,000. Maryland's existing personal income tax structure has a 4.75 percent bracket for earnings above $3,000.

The agreement also calls for an increase in the corporate income tax from 7 to 8.25 percent. The rate is higher than a Senate proposal of 8 percent. Still, it was lower than the House proposal of 8.75 percent. Lawmakers also agreed to remove a new corporate reporting system proposed by Gov. Martin O'Malley that would require multi-state companies to pay taxes based on the share of profit that they made in Maryland, rather than the income of their in-state operations.

The House passed a bill that would institute the practice -- known as combined reporting -- but a Senate proposal to study corporate taxes before making a decision carried the day.

House members accepted a Senate plan to expand the sales tax to computer services, and both chambers agreed on raising the sales tax from 5 to 6 percent. House members, reluctant to expand the sales tax to services, did secure a 5-year sunset provision on the tax. Lawmakers also removed a provision that would expand the sales tax to arcade games.

House Ways & Means Committee Chairwoman Sheila Hixson, D- Montgomery, said House members accepted the computer services expansion because there's no other place to find the more than $180 million it would bring in.

"We feel a little trapped because of the amount of money involved, and we need it," she said. "We're not wildly enthused, but we didn't come up with something else that brings in [the money]."

Lawmakers also agreed in an increase from 5 to 6 percent in the vehicle titling tax, with a deduction for the full trade-in value of customers' vehicles. In addition, a provision was removed that would have reduced from six to three months the residency requirement for the personal income tax.