A game of chicken is developing between Democrats in the Maryland Senate and House over competing proposals to raise taxes. Senate Democrats want an across-the-board increase to income taxes to help close the state’s shortfall, while House members want to stick closer to Gov. Martin O’Malley’s proposal to cap exemptions and deductions for high-income earners.
With both sides waiting for the other to blink, Senate Democrats on Tuesday sought to make sure no one questions whether higher state taxes, in fact, are needed.
The chamber’s Budget and Taxation Committee staged a morning briefing on a “doomsday” budget that would take effect unless the state raises additional revenues.
The short of it: hundreds of millions of dollars in cuts to education; higher tuition rates at state universities and colleges; elimination of 500 jobs; an end to grants for violent crime reduction; outsourced juvenile detention services. And the list goes on.
Such warnings of a fiscal “doomsday” have been a common part of budget negotiations in Annapolis and other state capitals since the housing bust led to perennial shortfalls.
States have dealt with shortfalls differently, with some adopting austerity measures.
Maryland has cut spending $7.5 billion below automatic, programmed increases, but following O’Malley’s (D) lead, has also simultaneously increased spending on K-12 and Medicaid, partially with the help of federal stimulus funds, fund shifts and other budget maneuvers.
Now, with stimulus funds gone and projections that the state will continue to see shortfalls of roughly $1 billion annually, lawmakers have upped the ante to begin to close the state’s widening revenue and spending gap.
A joint legislative committee early this year charged O’Malley with halving the state’s structural deficit, or finding about $500 million in ongoing savings.
His budget would do so largely by shifting half of teacher pension costs to counties, and raising new tax revenue from high-income earners. Roughly the top 20 percent of the state’s income tax filers would face caps on deductions and exemptions.
The Senate plan would increase income taxes on most filers by approximately a quarter of a percent.
“This is not a scare tactic,” Senate President Thomas V. Mike Miller Jr. (D-Calvert) said Monday night in announcing the “doomsday” briefing. “We have three options, revenues, cuts or a combination of both … if we can’t come up with the revenues and we can’t come up with the cuts, we’re going to come up with a doomsday budget.”