ANNAPOLIS, Md. (AP) — Maryland real estate agents expressed alarm Wednesday at Gov. Martin O’Malley’s proposal to cap state income tax deductions for people who make more than $100,000, a change that would have a big impact on mortgage interest deductions.

Patricia Terrill, president of the Maryland Association of Realtors, said the proposal was just about the only thing that members of the 22,000-strong group were talking about during their annual legislative day in Annapolis.

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“Let’s face it, the homeowners have been beat up enough,” said Terrill, wearing a “Save Maryland’s Interest Deduction” sticker. “We need to protect our homeowners.”

Under O’Malley’s plan, a single Maryland taxpayer whose federal adjusted gross income is more than $100,000 would see a 10 percent reduction in the amount they could claim in state income tax deductions. A single earner making more than $200,000 would see a 20 percent reduction.

The governor says while he doesn’t like reducing the deductions, he has said changes in his budget plan would affect only about one in five Maryland taxpayers. O’Malley, a Democrat, says new revenue is badly needed after years of budget cuts due to the recession.

“It’s about fairness, and it’s about putting the state on the right path and resolving the structural deficit,” said Raquel Guillory, O’Malley’s spokeswoman, referring to the state’s $1.1 billion budget shortfall for the fiscal year that begins July 1.

Nonpartisan state budget analysts have described the governor’s overall budget plan as taking important steps toward closing the budget shortfall.

But Bill Castelli, a lobbyist for the realtors, said they will be battling the income tax deduction proposal during the General Assembly’s legislative session. With about 20 percent of Maryland homeowners underwater on their mortgages and property values down, Maryland homeowners continue to go through a lot of pain, Castelli said.

“So it’s something our industry takes very seriously when someone is trying to attack what we see as one of the foundations for promoting homeownership in this country,” Castelli said.

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State Comptroller Peter Franchot also criticized the proposal during a speech to the group, noting that too many Maryland residents find themselves underwater on their mortgages, a major problem for an industry that makes up about one-fifth of Maryland’s economy.

“We’ve got to reverse this tide, and the governor’s proposal to significantly reduce the mortgage interest deduction will do just the opposite,” Franchot, a Democrat, said. “It disproportionately burdens working Maryland families and is a direct shot at Maryland’s homeowners at a time when they’re already struggling to get by in a difficult housing market.”

Franchot said nearly 38 percent of Maryland residents claim mortgage interest deductions on their state tax returns.

Mortgage interest accounts for the largest amount of Maryland itemized deductions, comprising about 51 percent of them. Charitable contributions make up the second highest amount, or about 17 percent. Property taxes come next at about 14 percent.

The fact that the reduced deductions are aimed at higher-earning residents isn’t much consolation to real estate agents.

“I think it’s a question of, `Are we going to have policies that are going to be promoting homeownership?’ I think for us, it’s a question of, there is no right number,” Castelli said.

Real estate agents also said the governor’s proposal caught them off guard when he unveiled his budget proposal last week.

“We were extremely surprised, just because this has been such a tough issue for us nationally, to think that the states would start to look at whittling away at this, too,” Castelli said. “It really surprised us.”

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