January 19, 2012

GOV. MARTIN O’MALLEY (D) has offered a budget for Maryland that raises such a broad array of taxes that some lawmakers quipped that Mr. O’Malley may be too liberal even for Maryland.

There may be a strategic method to Mr. O’Malley’s madness, insofar as his proposed tax hikes may maximize his room to maneuver by multiplying the options he’s set before lawmakers. Still, and leaving aside the snark, the governor’s blueprint does give the impression of throwing almost everything against the wall to see what sticks — and in the process, milking not just the rich but the middle class as well.

At the risk of omitting some of the less noteworthy among his ideas, here’s a brief rundown of the main state levies the governor would raise: Income taxeson anyone making more than $100,000. The “flush tax” on household water and sewage use. Taxes on the coal industry and telecommunications companies (by eliminating tax breaks). The gasoline tax (still unannounced but widely expected). Sales taxes on some online retailers. And taxes on cigars and some other tobacco products.

Mr. O’Malley acknowledges his program will win him no popularity contests, but he insists it is fair. He’s right about the popularity, but we wonder about the fairness — and even more, the wisdom — of yet another tax hike that will fall disproportionately on affluent residents of the Washington suburbs, especially Montgomery County, who are already among the most heavily taxed people in a heavily taxed state.

While Montgomery County accounts for 16 percent of Maryland’s population, it has about 30 percent of the state’s 400,000 taxpayers making six-figure incomes. The governor says his income tax plan would cost a family of four making $150,000 an additional $191.

As it is, Fairfax County has been eating Montgomery’s lunch in the regional sweepstakes for jobs and economic development, not least because Fairfax’s tax burden is lighter. Mr. O’Malley’s proposal could tilt that playing field even more.

The tax increases are designed to help close a $1 billion deficit and also generate funds for poorer localities (including Baltimore City) that would be hit by another part of the governor’s budget: a major shift in paying for teachers’ pensions and retirement plans. Since the 1920s, the state has picked up most of that tab, which has grown to unmanageable proportions; Mr. O’Malley’s budget would assign half the annual bill going forward to Baltimore and the counties.

That’s a courageous proposal on the part of the governor, who has resisted it until now and who risks his support among teachers unions, a core of his political base. And it makes sense. As it works now, localities set the salaries on which teacher pensions are based but pass off most of the cost to the state. The perverse result is that localities have no reason to contain salaries and pension costs, which, unsurprisingly, have soared.

Mr. O’Malley’s proposal would restore some balance; it would also hit localities with a big bill. The governor says the state would cushion the blow with various steps, though it remains unclear whether and where that would work.

In the meantime, lawmakers should carefully consider which of the governor’s tax hikes are prudent — we’d say start with the gas tax, last raised 20 years ago — and which are not.