O'Malley's Tax Plans Put Democrats Between Him and Voters
By Ann E. Marimow and John Wagner
Washington Post Staff Writers
Thursday, October 11, 2007
On the campaign trail, Gov. Martin O'Malley played up his roots in Montgomery County, a jurisdiction that provided one of every five votes he received in last year's election. But as he pushes a plan to close Maryland's $1.7 billion budget shortfall, some of the stiffer resistance is coming from fellow Democrats in his old stomping grounds.
O'Malley's proposal to make the state income tax more progressive would hit more upper-end taxpayers in Montgomery than in any other jurisdiction, and many of the county's lawmakers have been at odds with the former Baltimore mayor's plans to legalize slot-machine gambling.
Those proposals have divided the legislative delegation, and some members say they are feeling conflicted as they try to reconcile their liberal leanings with the economic interests of Maryland's wealthiest jurisdiction.
"He stresses that he grew up here, but the way he has treated the county in the budget suggests that he didn't have a happy childhood," Del. Luiz R.S. Simmons (D-Montgomery) said of O'Malley (D), who moved from the county to Baltimore when he entered law school.
Under O'Malley's income tax plan, most Montgomery residents would get at least a modest break, but high-end earners would pay thousands of dollars a year more.
O'Malley said yesterday that Montgomery lawmakers have voiced some "legitimate concerns" in the weeks since he announced his proposals. He said he is open to "massaging" his income tax plan, a key part of the budget package on which he is seeking quick action in a special session, which could start as soon as Oct. 29. He also said that "the vast majority of Montgomery households would see their income taxes reduced under our proposal."
The governor stressed that his idea to gradually reduce the property tax by 3 cents per $100 in assessed value would benefit Montgomery more than any county. And he said that any state income tax increase for upper-end earners would still be less than federal tax cuts made under President Bush.
Philosophically, Montgomery's legislators -- all Democrats -- agree with O'Malley's desire to overhaul the income tax system to make it more "progressive," meaning those who earn more would pay a higher percentage.
But under new rates proposed by O'Malley, Montgomery residents earning more than $500,000 would pay a combined rate of almost 10 percent -- 6.5 percent in state taxes and the existing 3.2 percent county levy. That surpasses Virginia's top rate of 5.75 percent and the District's 8.5 percent. Maryland's current top income tax rate is 4.75 percent.
Moreover, more than 80 percent of the $163 million expected to be generated by the governor's income tax plan would come from Montgomery taxpayers, according to an analysis by the Comptroller's Office. The state would collect less in income taxes from many other jurisdictions, including Prince George's.
Montgomery County Executive Isiah Leggett (D) and Senate delegation leader Rona E. Kramer (D) have said they fear that such a burden and the sticker shock from the combined rate could hurt the county's ability to compete with its neighbors in Northern Virginia and the District. Although a family on, say, River Road is unlikely to pack up and leave Potomac for McLean, opponents of the tax plan say that newcomers to the area might choose not to live in Montgomery.
Others in the delegation have downplayed such concerns and credit O'Malley for devising a fairer structure.
"I have to represent all of my constituents, not just the millionaires," Del. Tom Hucker said.
Montgomery's 32-member delegation is the largest in the General Assembly. When united, the legislators have shown they can be a powerful voting bloc in Annapolis. In the House, the 24 Democratic lawmakers make up one-third of the votes needed for a majority.
Leggett has talked privately with legislators to try to set the tone for the delegation. He has met with the governor to convey the message that the dynamics in the Washington suburbs are different from those in Baltimore, where fewer people commute from out of state.
"It's been a long time since the governor lived in Montgomery County, and that's not a criticism of him," said Sen. Richard S. Madaleno Jr. (D). "While I grew up here, I learned a lot as an adult that I didn't realize as a teenager."
Among the Montgomery lawmakers who back O'Malley's tax plan is Del. Sheila E. Hixson (D), chairwoman of the House Ways and Means Committee, who has introduced legislation in past years to raise the tax rate for high-end earners.
Hixson acknowledged the awkward situation for lawmakers in trying to represent their constituents and support the Democratic governor. She said that the governor's plan might have to be tweaked to make it more palatable and suggested that the higher rates could be limited to a two- or three-year period.
"It's going to be a problem politically and every other way," she said.
But she said that if the $163 million is not raised at the state level, it will have to be raised locally to continue to offer services residents expect. "We value services," Hixson said, "and we've always been willing to pay for them in the past."
The topic is so sensitive that when Madaleno suggested to a reporter that the majority of the delegation would support the governor, he quickly received a half-dozen phone calls from lawmakers distressed by his comments.
Of all the budget fixes O'Malley has proposed, his plan to raise as much as $550 million a year from slot-machine gambling would have perhaps the least direct impact on Montgomery. O'Malley is seeking slots at racetracks and other locations beyond the county's borders. A report produced by the administration, however, says that Montgomery residents are among those most willing to travel to neighboring states to gamble.
In the past, the issue has generated some of the most vigorous opposition from Montgomery's lawmakers. All but four members of the House delegation voted against the only slots bill to clear the House, in 2005.
The change in leadership after the November election at the county level has tempered Montgomery's approach. Leggett -- unlike his predecessor, Douglas M. Duncan (D), who often led the anti-slots sentiment -- has counseled lawmakers to hold their fire. Although he is personally opposed to slots, Leggett says he wants to position the county to negotiate with the governor for continued state payments for teacher pensions and a larger boost in funding for schools.
Reaction to that strategy has been mixed, and not everyone is taking Leggett's advice. Comptroller Peter Franchot, a former Montgomery delegate, has held news conferences to drum up opposition to O'Malley's plan. Simmons and county Del. Heather R. Mizeur (D) joined Franchot at an appearance last week in Silver Spring.
O'Malley is considering trying to bring more opponents on board by putting the issue to a public vote. That would "finally let the people decide in a way that their representatives have been incapable of," O'Malley said at a town hall meeting yesterday in Salisbury.
Montgomery leaders have also said that O'Malley's proposal to spend almost $400 million on transportation is not nearly enough to jump-start projects needed to ease congestion in the Washington suburbs. Montgomery could suck up every penny, with hundreds of millions of dollars on its wish list for additional HOV lanes north of Shady Grove on Interstate 270, a new interchange at Georgia Avenue and Randolph Road, and the Corridor Cities Transitway.
House Majority Leader Kumar P. Barve (D-Montgomery) is sympathetic and blames the shortcomings in transportation funding on budget realities, not the governor.
"It's unfair to hang that on Governor O'Malley's door," he said. "I think Martin understands Montgomery's needs. I just want to make sure that understanding is written into the budget."
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