Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Maryland millionaire's tax on the way out

By Tami Luhby, senior writer


NEW YORK (CNNMoney) -- Maryland millionaires will have a little more money in their pockets come 2011.

The state's 6.25% tax rate on income of more than $1 million will expire in the new year.

Maryland imposed the so-called millionaire's tax in 2008 along with several other measures to help close a $1.7 billion budget gap.

And Gov. Martin O'Malley, a Democrat, does not intend to bring it back, instead promising to wipe out a projected $1.2 billion budget gap with spending cuts.

"We can balance the budget through cuts and without new taxes," said Shaun Adamec, O'Malley's press secretary.

Maryland is one of several states that levied millionaire's taxes to raise money amid the Great Recession. Hawaii, New Jersey, New York and Wisconsin raised taxes on high earners in 2009. Oregon did so this year, and Washington tried to but the measure failed at the ballot box. All are temporary except Wisconsin's.

Taxing the rich is more politically feasible than other tax options, said Joe Henchman, director of state projects for the Tax Foundation. It divides the opposition because elected officials can tell the majority of residents, "Don't worry, you won't be the ones paying these taxes," he said.

When O'Malley marketed the proposal in 2007, he stressed that it would raise taxes on only 3.7% of the state's households. The millionaire's tax was part of a broader overhaul to the state's income tax system, which cut taxes on most residents.

The levy on the wealthiest has raised $120 million, according to Maryland's Comptroller's Office. High earners won't be completely off the hook in 2011: There still is a 5.5% tax on income greater than $500,000.

At least one state senator reportedly wants to reinstate the tax, but most lawmakers and governors nationwide are not in a tax hike mood. State officials across the country have shied away from raising taxes this fiscal year, which began July 1, increasing them only $6.2 billion after hiking levies nearly $24 billion a year earlier.

"Tax increases were not on the forefront of lawmakers' minds in 2010," said Todd Haggerty, policy associate at the National Conference of State Legislatures.

Several other tax measures instituted in 2009 will also expire at midnight Friday. California's tax rate will drop 25 basis points at all levels in 2011. And North Carolina residents will no longer pay surcharges of 2% of their tax levy on income greater than $60,000 and 3% on earnings greater than $150,000. To top of page

Index Last Change % Change
Dow 16,351.38 293.03 1.82%
Nasdaq 4,749.98 113.87 2.46%
S&P 500 1,948.86 35.01 1.83%
Treasuries 2.16 -0.03 -1.37%
Data as of 9:24am ET
Company Price Change % Change
Dow Chemical Co 42.39 0.73 1.75%
EMC Corp 24.13 0.12 0.50%
Comcast Corp 55.88 0.86 1.56%
Activision Blizzard ... 28.37 0.51 1.83%
Hospira Inc 89.95 0.00 0.00%
Data as of Sep 2
Sponsors

Sections

BB-8 is the new rolling droid in the upcoming 'Star Wars: The Force Awakens.' Startup Sphero made a mini version for you to take home. More

Millennials are looking for a buying opportunity and the current stock market gyrations seems to offer that. Many are jumping in. More