Maryland Budget

Heated Testimony, No Consensus on O'Malley's Tax Measures

By Philip Rucker and Ovetta Wiggins
Washington Post Staff Writers
Friday, November 2, 2007

Maryland Gov. Martin O'Malley's plan to close an expected budget shortfall evoked passionate responses from constituencies from across the state yesterday, underscoring the challenge lawmakers face in reaching consensus as they move into the fifth day of a special session.

Legislators heard a stream of testimony from lobbyists, local officials and citizens on increasing the sales tax and overhauling the personal income tax structure, two of the more controversial measures introduced by O'Malley (D) to eliminate a projected deficit of at least $1.5 billion.

Hearings also were held on legislation to reduce the property tax and double the tobacco tax, as well as the governor's initiative to extend health care insurance to 100,000 uninsured adults.

In a hearing on O'Malley's income tax proposal -- which would raise taxes on the state's wealthiest residents while providing a modest break for others -- Montgomery County figured prominently. The governor's plan would affect the state's largest and most affluent county more than any other jurisdiction.

In testimony before lawmakers yesterday, Montgomery County Executive Isiah Leggett (D) said O'Malley's proposed top tax rate of 6.5 percent is too high. Leggett, who is pushing an alternative plan with a top rate of 5.5 percent, said Montgomery's tax burden would be greater than Virginia's and the District's under the plan.

"Just like the governor, I believe strongly in progressivity," Leggett told lawmakers. But, he added, "I am very concerned about the long-term effect it will have on Montgomery County's role as the economic engine of the state."

Karen Syrylo, a state taxation consultant and a member of the Maryland Chamber of Commerce, said that O'Malley's proposal has led some business owners to voice a desire to relocate to Northern Virginia.

But a slew of interest groups testified in favor of O'Malley's progressive income tax proposal.

"Government should raise revenue on an ability-to-pay basis," League of Women Voters President Lu Pierson said. "We are a wealthy nation. We can do better."

Maryland Association of Counties Vice Chairman James T. Smith Jr., the Baltimore County executive, said failure to adopt the governor's plan would force county governments to raise property taxes.

O'Malley's proposal to raise the sales tax from 5 to 6 percent and extend it to service areas, including real estate management and health club fees, also elicited strong feelings.

Realtors and health club owners rallied outside the hearing room in Annapolis yesterday, saying the state sales tax should not be applied to their services. "The consequences of our members not being able to work out because of expenses will be that obesity will increase," said Bob Seaman, who runs health clubs in Prince George's and Anne Arundel counties.

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