O'Malley Wants to Raise Sales Tax to 6%

Maryland Gov. Martin O'Malley (D) proposed increasing the state sales tax from 5 to 6 percent yesterday and applying the levy to several services that are currently exempt, including health clubs, tanning salons and real estate property management.

Aides said that O'Malley's proposal would generate $804 million a year, making it the largest component of a plan that he is rolling out over several days to bridge a looming $1.7 billion budget shortfall and raise nearly $400 million more for transportation projects.

Speaking at a news conference in Howard County, O'Malley also confirmed his intentions to push for a 3-cent cut in the state property tax rate, which is 11.2 cents per $100 in assessed value. That is one of several parts of O'Malley's plan designed to make the tax code "more fair" even as he and lawmakers seek hundreds of millions of dollars in additional revenue.

"There are very few taxes that hit homeowners on fixed incomes in a rougher way," O'Malley said during his second appearance in two days at the media event, held in front of a private residence in Ellicott City.

Under O'Malley's plan, the owner of a $400,000 home would realize savings of $120 on a property tax bill once the 3-cent cut was fully phased in after three years.

O'Malley's series of rolling announcements was criticized yesterday by Senate Minority Whip Allan H. Kittleman (R-Howard) as a "traveling magic show" that has emphasized popular aspects of the plan but played down the effects of multiple tax increases.

On Wednesday, O'Malley detailed an income tax proposal that would raise rates for higher-end earners but provide at least a modest tax cut to most filers. Other parts of his plan that have not been publicly announced include a proposal to raise the cigarette tax by $1 per pack, raise the corporate income tax from 7 to 8 percent and raise the titling tax on vehicles from 5 to 6 percent.

"He's doing a very good job trying to distract Marylanders from the true effect of these measures," said Kittleman, who attended O'Malley's event and attracted reporters while he stood on a street near the site of the news conference.

A coalition of business groups led by the Maryland Chamber of Commerce also voiced concerns yesterday about aspects of O'Malley's plan, suggesting that it would lead to job losses.

However, during his appearance yesterday, O'Malley was praised by Howard County Executive Ken Ulman (D) for tackling the projected budget shortfall. Ulman also endorsed O'Malley's plan to fix the budget in a special legislative session by early November, which some lawmakers oppose.

"It's time to roll up our sleeves and get this done," Ulman said.

O'Malley acknowledged that under his sales tax proposal, "all of us are going to pay more." But he said that raising the rate to 6 percent would keep the state competitive with others in the region.