Seniors, Low-Income Families May Get Tax Cuts

O'Malley Would Double $1,000 Exemption for Elderly Despite Projected $1.7 Billion Shortfall

Maryland Gov. Martin O'Malley announced a pair of tax breaks yesterday designed to help senior citizens and low-income families at a time when his administration is seeking to raise several other taxes to help close a projected $1.7 billion budget shortfall.

Appearing at an assisted-living facility in Prince George's County, O'Malley (D) said he would ask the General Assembly to double a $1,000 income tax exemption available to taxpayers 65 and older.

O'Malley also proposed a $50-a-year sales-tax rebate that could be claimed by households with gross annual incomes up to $30,000. As part of his larger revenue package, O'Malley is advocating an increase in Maryland's sales tax from 5 to 6 percent and would apply the tax to several services that are currently exempt, including tanning salons and health clubs.

The $50 tax break was designed to "alleviate any sort of hit that would come from that 1-cent increase in the sales tax," O'Malley told several dozen seniors, some in wheelchairs or using walkers, gathered in the community room at Victory House in Landover. He was joined by Lt. Gov. Anthony G. Brown and Gloria G. Lawlah, secretary of aging, both of whom are Democratic former legislators from Prince George's.

House Speaker Michael E. Busch (D-Anne Arundel) said he considers the proposed tax breaks "laudable" but noted that "the more exemptions you have, obviously the more you're going to have to raise to address the deficit."

O'Malley also used the appearance to formally announce his plan to increase the tax on a pack of cigarettes from $1 to $2. That proposal, which O'Malley shared with lawmakers at a private meeting last week, has been widely anticipated.

O'Malley said the tax increase would discourage smoking and raise additional revenue that could be used to expand subsidized health care.

According to a legislative analysis this year, doubling the cigarette tax would initially generate about $220 million for the state annually, but revenue from the tax is projected to decline as fewer people smoke.

O'Malley said the new revenue would be used first for deficit reduction and then for new health-care initiatives to "bridge us to a more rational, compassionate and common-sense system."

The governor promised to unveil more details about his plans to reduce the ranks of Maryland's uninsured later but said he will seek incentives for small businesses to provide health care for their employees.

The goal, O'Malley said, will be to create "a better system of health care where people can get the preventative health care they need upfront, instead of all us having to pay the cost of care of emergency rooms and ambulances, and all of it when people get so sick."

While O'Malley was in Landover, five senior members of his administration appeared at a meeting of the Senate Budget and Taxation Committee in Annapolis, marking the first public give-and-take with legislators since O'Malley started rolling out his revenue package in installments last week.

Questioning was generally gentle, although administration officials acknowledged that they have a challenging sales job ahead, particularly in the House of Delegates.

"I think it's a pretty good package," said Sen. Ulysses Currie (D-Prince George's), the Senate budget panel's chairman. "It's a package I believe we can work with."

Other components of O'Malley's plan include an overhaul of the state's income tax brackets that would raise the amount paid by upper-end earners but offer a break to most filers; an increase in the corporate income tax from 7 to 8 percent; an increase in the titling tax on vehicles from 5 to 6 percent; a reduction in the state property tax rate from 11.2 cents per $100 in assessed value to 8.2 cents; and the legalization of slot machine gambling, generating more than $500 million a year for the state.

O'Malley is scheduled to offer more details of his plan, including some additional budget cuts, in a speech to business and community groups in Annapolis this afternoon.