Friday, Aug. 31, 2007
by Sean R. Sedam | Staff Writer
ANNAPOLIS — In a summer full of uncertain prospects for a special legislative session and few specifics about what either Gov. Martin O’Malley or state lawmakers plan to offer as solutions to a $1.5 billion budget gap, the refrain ‘‘all options are on the table” has crossed the lips of many.
Many of the options — a series of tax proposals — crossed the desks of the House Ways and Means Committee during this year’s legislative session. None passed. Many drew negative reactions.
It could have been a preview of things to come.
‘‘Ways and Means held all these hearings on every feasible tax this session,” committee Chairwoman Sheila Ellis Hixson said during an interview in her Annapolis office. ‘‘People thought we were crazy and were getting reactions. We said, ‘No, we’re sort of breaking the ice for you to get ready that it’s going to come from one or more of these sources.’ We wanted them to see it.”
If O’Malley (D) does not call a special session this fall, the legislature is expected to face an ugly negotiation early next year to close the budget gap.
O’Malley was highly visible in Ocean City two weeks ago, using the Maryland Association of Counties’ annual summer conference to assure county officials that they will bear some — but not all — of the burden of balancing the state’s budget.
Lawmakers, on the other hand, are making no such pledges.
‘‘The governor came out and said we won’t put it on the counties,” said Hixson (D-Dist. 20) of Silver Spring. ‘‘He came out with that statement. He didn’t tell us he was going to say that. When we said everything’s on the table, everything’s on the table. We haven’t made any promises to MACo.”
Weighing taxes, revenues
Lawmakers are considering increasing the gasoline tax, the sales tax and the income tax and closing the corporate tax loophole.
During this year’s session, Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach proposed a 12-cent per gallon gasoline tax increase, which budget analysts estimate would bring in more than $400 million a year for transportation projects.
O’Malley, during his speech to MACo, pledged more money for the state’s $40 billion in unmet transportation needs. But he did not say whether the money would come from a gasoline tax hike or higher automobile fees.
State Transportation Secretary John D. Porcari last week suggested tying the fuel tax to the cost of construction. Some states tie the tax to the Consumer Price Index.
‘‘I think we’re going to have to do a gas tax,” Hixson said. ‘‘If we index it, there are a number of ways we can do it. But that’s one [tax] that’s very acceptable.”
Hixson said she does not expect much public backlash from a fuel tax hike, adding that much of the ire over high gasoline prices is aimed at the oil companies and the federal government.
‘‘When we have raised the gas tax, we don’t get a reaction from the public,” Hixson said, recalling the last time the state raised the tax, in the early 1990s under Gov. William Donald Schaefer (D). ‘‘It’s because it’s the tax that you can see — these big signs up, ‘These are your tax dollars at work,’ the roads, the bridges, the repairs.”
A sales tax ‘‘is probably the [tax] that you’ll see a lot of discussion on and the one that’s very palatable,” Hixson said.
A 1- or 2-cent increase in the sales tax would keep Maryland in line with the sales taxes of its neighbors, she said, rejecting the argument that a sales tax would hurt the poor.
‘‘I know they talk about low-income people being hurt most, but we don’t tax food or pharmacy,” she said. ‘‘Virginia does [tax food], other states do. We don’t. ... We are not considering taxing either of those categories. It doesn’t make sense for our health care problem, and it doesn’t make sense for the poor.”
The state also must close a loophole that allows corporations to avoid taxes on real estate transfers, Hixson said.
Budget analysts have said it is difficult to predict how much closing the loophole could bring to the treasury. Supporters say it could net about $150 million a year.
While revenue from closing the loophole will not fill the budget gap by itself, ‘‘We could use it for something,” Hixson said. ‘‘... That’s more good tax policy.”
Bearing the burden
Some lawmakers are calling for a progressive income tax hike, which would charge taxpayers increasingly more as their income rises. Montgomery officials worry that their residents would bear a disproportionate burden, paying in about 35 percent of the state income tax revenue.
‘‘There are a number of [legislators] who want the progressive tax,” Hixson said. ‘‘If they get it, it hurts [Montgomery County] most. But it’s the fair way to go. So [the Montgomery delegation] may have to give up something to get something. But the tax package is the key. We just shouldn’t be making any commitments today, in my opinion.”
At a July 30 closed-door meeting in Rockville, County Executive Isiah Leggett (D) asked the Montgomery County delegation not to commit to any slot machine gambling plans.
‘‘Least of all, [slots gambling] would keep the Maryland money in Maryland ...” said Hixson, who attended the meeting. ‘‘It’s the expansion of an existing gaming issue that’s already in the state.”
Fraternal organizations on the Eastern Shore are allowed to run slot machines under a grandfather clause. Western Maryland counties bring in revenue through tip jar games, and veterans groups have brought forward bills to have slot machine gambling expanded there, but none has passed.
Hixson teamed with House Speaker Michael E. Busch (D-Dist. 30) of Annapolis on a 2005 slots package that passed in the House but died in the Senate.
The state should run any slots operation, with the lottery commission selling the licenses and money flowing into the state, she said.
As with the tax proposals, the onus is on O’Malley to outline a slots plan, Hixson said.
‘‘The rationale is really the governor. He has to step up first before we start gathering votes or language for it. He has to tell us what he wants. Is he only asking for slots at tracks? Is he going to go beyond that? I don’t have that answer. But we’re waiting for him,” she said.
The state must look beyond the $1.5 billion deficit, Hixson said. To pay for ongoing programs, the state needs up to $2 billion, she said.
‘‘The inflation keeps going up,” Hixson said. ‘‘So we’re looking at a larger number than that so that we can take care of the health care issues and education.”
As for a special session, ‘‘It’s a 50-50 chance of it happening,” Hixson said. ‘‘Of course, we have to look to the governor for that. We’re looking for direction there. ... He’s thinking of ideas, but we haven’t seen anything concrete.”
Hixson said she does not have a preference on whether there is a special session.
‘‘But I would like to see something get done as soon as possible,” she added.
Resolving the deficit before January would allow legislative energies to shift elsewhere.
‘‘The presidential [primary] election is Feb. 12 in Maryland,” Hixson said. ‘‘Where are we going to be? What are we going to be concentrating on? One of everything. It’s going to be a mess, there’s no question.”