O'Malley To Stump For Tax Increases
Budget Measures Also Include Slots

By John Wagner
Washington Post Staff Writer
Wednesday, September 19, 2007

Gov. Martin O'Malley will start making the case publicly this morning for a wide-ranging revenue package that includes increases in the sales, corporate income and tobacco taxes but forgoes a significant increase in the gas tax and includes a cut in property taxes.

Today's scheduled appearance in Baltimore County follows two days of closed-door meetings with lawmakers in which O'Malley (D) has shared the outlines of a politically risky plan to close a budget shortfall now projected to be about $1.7 billion next year while raising close to $400 million a year for transportation needs.

The package, O'Malley has told lawmakers, also includes higher income taxes on upper-end earners but provides relief to lower- and middle-income families. And it seeks to raise more than $500 million a year from slot-machine gambling.

"There's a little bit of everything in it," House Speaker Michael E. Busch (D-Anne Arundel) said yesterday after emerging from an hour-long breakfast at the governor's mansion.

The meeting was part of an attempt to build enough consensus for the plan to hold a special legislative session by early November. Senate President Thomas V. Mike Miller Jr. (D-Calvert) has been supportive of O'Malley's efforts, whereas Busch and other House leaders have questioned the wisdom of a special session, suggesting that the package can be debated in January, when lawmakers return to Annapolis for their annual 90-day session.

Lawmakers at the breakfast said O'Malley -- who has largely avoided reporters in recent days -- spoke forcefully about his desire to call a special session, which his press secretary later confirmed. "He feels we need to move forward quickly and get this behind us," O'Malley spokesman Rick Abbruzzese said.

Although most components of O'Malley's plan have been publicly floated or leaked to the media in recent weeks, several new details came to light yesterday.

O'Malley told lawmakers that he would like to raise the corporate income tax from 7 percent to 8 percent. Half the additional revenue, lawmakers said, would go toward higher education, and the other half would be steered to the transportation trust fund.

That fund is separate from the state's $15 billion general fund, in which there is a projected shortfall of about $1.7 billion for fiscal 2009, which starts in July. But the transportation fund faces problems of its own.

Transportation Secretary John D. Porcari told a separate gathering of lawmakers yesterday that revenue flowing into the fund, including the gas tax, has not kept pace with Maryland's growing transportation needs. That is in large part, Porcari said, because the revenue is not pegged to inflation. The gas tax, the largest source of transportation revenue, was last raised in 1992.

O'Malley said this year that he would consider support for a significant increase in the gas tax, which is now 23.5 cents a gallon. Some lawmakers have suggested increases as large as 12 cents.

O'Malley told lawmakers yesterday that the state should not impose a large, one-time increase but that it should start adjusting the tax for inflation -- a move that could result in annual increases at the pump of 0.7 cents to 0.8 cents a gallon each year, Porcari said.

"We simply have to have indexing," Porcari told lawmakers, describing the move as necessary "just to keep running in place."

O'Malley also indicated that he is interested in raising the titling tax on vehicles from 5 percent to 6 percent of purchase price. That tax, which also flows into the transportation fund, was last raised in 1978.

Aides suggested that of the two levies, the titling tax would be less politically damaging to raise than the gas tax. Recent polls have shown widespread opposition to a gas tax increase, particularly with continued high prices at the pump.

They said O'Malley has scheduled a series of events in coming days to flesh out various components of his plan for the public, starting this morning.

His plan to raise revenue from the legalization of slot-machine gambling remains one of the least detailed. Aides said O'Malley is crafting a plan that seeks to split the difference between bills that previously passed the Senate and one that cleared the House in 2005 by the minimum number of votes.

Busch has said repeatedly that a slots bill remains a hard sell in his chamber. "The governor's going to have to work with the speaker to get it passed," said Miller, a leading slots proponent.

There appears to be broader buy-in on other elements of O'Malley's plan, including: raising the sales tax from 5 percent to 6 percent; raising the cigarette tax from $1 a pack to $2; and rolling back state property taxes, which are now 11.2 cents per $100 in assessed value.

Miller said that he and Busch also agree that O'Malley should seek additional cuts in state aid to local governments. Education and other aid to localities now makes up about 40 percent of the state's general fund budget. O'Malley, the former mayor of Baltimore, has pledged to protect the interests of counties and municipalities.

"The governor's been very gentle in terms of the counties," Miller said. "Too gentle."

Yesterday's meeting at the mansion did not include any Republicans, who hold a small minority of seats in both chambers. Senate Minority Leader David R. Brinkley (R-Frederick) said he remains convinced that the budget can be balanced without raising taxes and that a special session is not needed.

"The purpose of the breakfast was to get everyone singing off the same song sheet," Brinkley said. "I'm not sure that happened."

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