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Proposed Budget Remedies Include Slots, More Taxes
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Two bills have been introduced this session that would apply the existing 5 percent rate to a host of new services. Among them: barbershop visits, car repairs, shoe repairs, exterminating, use of a notary public, interior decorating, massage, dieting help and hot-tub cleaning.
Some states already have similar policies. When Maryland considered such a move in 2004, legislative analysts estimated that it could raise more than $400 million a year.
Proponents of the bills say they are an attempt to modernize the state's tax structure, reflecting a shift in the economy from consumption of goods to consumption of services. But leading lawmakers acknowledge that such a move would evoke outrage from a range of constituencies.
Other Tax Increases
Maryland's individual and corporate income taxes have received relatively little attention this session but will be part of the discussion moving ahead, lawmakers say. Raising income tax rates on the state's highest earners alone could generate several hundred million dollars, according to analysts.
Others bills that have been introduced this session and are likely to be weighed again would double the current $1 a pack tax on cigarettes and raise the gas tax by 12 cents a gallon.
The tobacco tax increase would raise close to $200 million a year initially, analysts say, but then decline as fewer people smoke. Proposals pending in the legislature would use the money to expand health care and therefore not help reduce the budget deficit. But some argue that the money could be better spent on that purpose.
The gas tax is used to fund transportation projects and also has no effect on the general fund shortfall. But many lawmakers, including Miller, say the money is badly needed. Miller's bill would raise the tax from 23.5 percent to 35.5 percent a gallon, yielding about $400 million a year.
Legalizing Slots
Efforts to close the budget gap would also resurrect a long-running battle over legalization of slot-machine gambling, lawmakers say.
A bill put in by Miller to generate discussion this session would legalize 15,500 machines at seven venues and generate about $800 million a year for the state. O'Malley has voiced support for a more limited program, and Busch has been a staunch slots opponent.
Miller argued that any package passed to address the deficit should include slots. In an interview last week, Busch declined to say whether he would be willing to entertain a slots proposal, saying he wants to first see what O'Malley proposes.
