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Taxes Lie at Heart Of Malpractice Veto

Ehrlich's Opposing of HMO Levy at Issue

By Matthew Mosk and John Wagner
Washington Post Staff Writers
Monday, January 3, 2005; Page B01

Gov. Robert L. Ehrlich Jr. waged a nine-month campaign to put malpractice insurance at the top of Maryland's political agenda. He summoned grumbling lawmakers into a special holiday session aimed at protecting doctors from a double-digit rate increase.

And yet when Democrats in the state legislature produced a plan last week to cushion physicians from the increase, Ehrlich (R) appeared on the 11 o'clock news to declare the effort a failure and to announce his plans for a swift and certain veto.

"The net result of this exercise is a tax bill," Ehrlich said of the plan. (File Photo)

At the heart of the governor's opposition, which is costing him a rare legislative victory, is a subject that helped him get elected in 2002 and that probably will be a foundation of his reelection bid in 2006: taxes.

"The net result of this exercise is a tax bill," Ehrlich told reporters, pointing to the Democrats' plan to reduce the doctors' insurance burden by levying a 2 percent tax on HMO premiums. "We didn't call these folks into special session so they could pass a regressive tax that will be passed on to those who can least afford to pay it."

To Democratic lawmakers, the governor's pledge to stamp "veto" on their bill this week represents a failure of leadership and a betrayal of the doctors whom Ehrlich vowed to help. They pledged to overturn his expected veto when the legislature assembles again next week.

But Ehrlich's supporters see the move as part of a broad attempt to define him as a last line of defense against taxes, distinguishing the governor from Democratic opponents.

Ehrlich became the first Republican to be elected Maryland's governor in a generation in part by campaigning on a firm pledge to fight taxes. Since then, he has a mixed record. He has fended off a range of legislative proposals, including rejecting a $1 billion income and sales tax increase offered as an alternative to his other top priority: the expansion of slot machine gambling.

But he also oversaw a nickel increase in the state property tax rate in 2003, citing pressing fiscal woes. And he paid for key transportation and environmental initiatives by increasing the fee for registering a car and adding a state surcharge to residential sewage bills.

When Democrats last week proposed paying for medical malpractice relief with a tax on HMO premiums, Ehrlich saw an opportunity to gain the upper hand in this long-running partisan debate, said James Gimpel, a political science professor at the University of Maryland.

"If he comes away with anything positive from this, it's that he has drawn an important political distinction between himself and the legislature on the issue of taxes," Gimpel said. "He understands that one of the only ways Republicans get elected in Maryland is by pointing to the other party as being fiscally irresponsible."

Democrats, however, believe Ehrlich's attempts to send a message about taxes have backfired.

Rather than showing loyalty to taxpayers, Ehrlich revealed a fealty to HMOs and an inability to compromise, Democrats said. If he had been willing to give ground on the HMO tax, they have contended, Ehrlich might have had more success negotiating the tougher limits he was seeking involving medical malpractice litigation.

"Unfortunately, this administration cares more about corporate profits than it does about the health care needs of Maryland citizens," House Speaker Michael E. Busch (D-Anne Arundel) said.

On the heels of a failure to win passage of his slots initiative, the outcome of last week's special session could raise doubts about Ehrlich's ability to lead, Del. Samuel I. Rosenberg (D-Baltimore) said. "A governor should not lose his signature initiative once, much less twice," he said.

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