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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,841.98 -86.22 -0.48%
Nasdaq 4,919.64 -19.69 -0.40%
S&P 500 2,080.15 -9.31 -0.45%
Treasuries 2.24 0.06 2.94%
Data as of 10:48pm ET
Company Price Change % Change
Bank of America Corp... 16.29 -0.06 -0.37%
Apple Inc 125.01 -0.27 -0.22%
Microsoft Corp 46.28 -1.32 -2.77%
Chesapeake Energy Co... 14.72 -1.14 -7.19%
Frontier Communicati... 5.94 -0.80 -11.87%
Data as of 4:03pm ET
Sponsors

Sections

Keep an eye on you burgers. After 13 years, the Hamburglar is back at McDonald's. More

Good news for people in Texas and North Dakota: McGladrey chief economist Joe Brusuelas believes the painful period of layoffs is largely done. More

Big Idea Week kicked off in New York City, and it brings the entrepreneurship of the tech industry -- and its workers -- into the classroom. More

Lori Greiner, an investor on ABC's "Shark Tank" offered advice for women looking to be more successful in business. More