State Senate leaders told a business group Wednesday that they expected to see some sort of small business tax relief in the coming legislative session, possibly coupled with an increase in the minimum wage.
Speaking to a Howard County Chamber of Commerce breakfast, Sen. Ed Kasemeyer, chairman of the Budget and Taxation Committee, said that a work group of his committee wants to “do something” on the subchapter-S small business pass-through tax rate. Pass-through tax businesses pay tax on business income at the individual rate.
“We just have a concept in mind” and no details, said Kasemeyer. The work group includes fellow Howard County Democrat Jim Robey, the new Senate majority leader and a budget subcommittee chairman, who also attended the breakfast.
Legislators are also discussing reducing the 8.25% corporate income tax rate, but Kasemeyer mentioned the strong interest of the Greater Baltimore Committee in providing some tax relief for “pass through” income for subchapter-S owners and sole proprietors.
Subchapter-S corporations are set up so that the corporation’s earnings are not taxed, but are distributed to individual private owners, who then pay personal income tax on the earnings.
Maryland’s income tax is the highest in the region. The top rate on household income above $300,000 comes to almost 9% in some of the largest jurisdictions when county piggy-back income taxes are included.
Minimum wage hike expected to pass
There was general agreement even from Republicans who opposed the move that some increase in the Maryland minimum wage of $7.25 an hour would pass this session.
“This issue has legs,” said Sen. Allan Kittleman, R-Howard, a member of the Finance Committee that defeated a minimum wage hike earlier this year in an 8-3 vote. Five Democrats joined the committees three Republicans in rejecting the wage hike.
“It actually hurts the people you’re trying to help,” Kittleman said. “You have to be careful with unintended consequences.”
A coalition of progressive groups and labor unions are backing a minimum wage hike again. Gov. Martin O’Malley, Senate President Mike Miller and House Speaker Michael Busch have all announced support, which they did not do in the last session.
“It’s going to pass,” said Robey. “The only question is what it looks like when it come out of the chute.”
“I do think it’s going to be part of a bigger package,” Kasemeyer said. “Something that business wants will be coupled with it.”
Kasemeyer said a wage hike will be possibly phased in over a period of time.
Del. Frank Turner, vice-chairman of the House Ways & Means Committee, said, “I think what we want to look at is how much we want to raise it.”
Rain tax repeal called unlikely
Opinions were more mixed on the fate of the “rain tax,” the stormwater runoff charges the state forced the 10 largest Maryland jurisdictions to enact.
Kittleman is proposing legislation to repeal it, and on the last day of the General Assembly session, Kasemeyer won Senate passage of a one-year delay, which died in the House.
There’s a wide range of charges being applied to different homeowners, businesses and nonprofit organizations. In some counties, leaders have opted to charge a very minimal fee — such as Frederick County’s 1-cent fee — drawing criticism from state agencies who say they are not complying with the law. The law did not set a specific tax rate.
“All these things should have been uniform,” said Kasemeyer, who thought it was a basic mistake that the 2012 legislation was not referred to his tax committee.
“I think there’s still room for negotiation,” he said. “I think it can be improved on.”
“We’re not going to repeal it,” said Turner. That’s “not going to get out of committee.”
“We’re going to fix it,” Turner said.
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