Senate Committee Amends Tax Plans, Backs Vote on Slots
By John Wagner and Philip Rucker
Washington Post Staff Writers
Wednesday, November 7, 2007
A Senate budget panel yesterday scaled back Maryland Gov. Martin O'Malley's plan to raise taxes for high-income earners and suggested applying the state sales tax to several services that were not in his proposal.
The actions by the Senate Budget and Taxation Committee occurred during an afternoon of deliberations that ended when the panel signed off on most components of the governor's deficit-reduction package, but only after making several significant changes.
The committee also approved the governor's plan, largely intact, to hold a public referendum next year on legalizing slot machine gambling at five locations to generate revenue and subsidize the state's troubled horse-racing industry.
In a statement last night, O'Malley (D) praised the panel's work, which could lead to votes by the full Senate today, saying that it represented movement "toward consensus on a long-term solution" to a budget shortfall of at least $1.5 billion. Lawmakers are meeting in a special session called by O'Malley to address the budget problem.
In a nod to Montgomery County lawmakers, the panel reduced O'Malley's proposed new top income tax rate from 6.5 to 5.5 percent. Lawmakers in Montgomery, which is home to more high-income earners than any other jurisdiction in Maryland, had said that the income tax plan proposed by O'Malley could hurt the county's economic interests.
The panel endorsed O'Malley's plan to raise the state sales tax from 5 to 6 percent but rewrote his proposal to apply the levy to several services that are currently exempt. Under the amended plan, Maryland would start taxing computer services, landscaping work and arcades.
Legislative analysts said those services would bring in significantly more revenue than the ones O'Malley has proposed to tax, which include health clubs, tanning and massage parlors, and property management firms. They were cut from the Senate plan.
Those changes were harshly criticized by Republicans, who alleged that the affected businesses had no chance for input.
"They don't even know they're in this bill," said Sen. E.J. Pipkin (R-Queen Anne's). "That's wrong. Democracy is about letting the public have transparency and participating, neither of which took place today."
The Senate panel also directed O'Malley to cut the budget more deeply than he has pledged to, in part by eliminating 750 vacant state jobs. The committee eliminated the governor's proposed property tax reduction and tweaked his plan to curb the growth of education spending in coming years.
And the committee endorsed the governor's plans to raise the corporate income tax, to double the tobacco tax and to raise vehicle titling fees.
But the panel balked at his plan to periodically raise the gas tax to reflect increases in road and transit construction costs. As an alternative, lawmakers earmarked a portion of the state sales tax to pay for transportation priorities.
The House, which is holding off sending bills to the floor before the Senate votes, also had a busy afternoon. The Appropriations Committee labored through proposed spending cuts to trim about $500 million from the budget for the fiscal year that starts in July.
Delegates appeared unwilling to eliminate a 2 percent cost-of-living wage increase for state employees, a cut that legislative analysts said would save about $62 million.
Lawmakers from both parties said that the state government is losing employees to higher-paying jobs in federal and local governments and the private sector.
But they seemed supportive of a proposal to require local governments to split next year's increase in retirement costs of teachers, librarians and community college faculty, a burden that has historically been covered by the state.
The House is also considering cuts in state funding for several student programs, school transportation grants and school improvements.
And it weighed eliminating $3.3 million from the State Board of Elections, which was to be used to replace the state's Diebold electronic voting machines with a system that provides paper receipts.
Lawmakers on a House Appropriations subcommittee considering the cuts did not vote, but some delegates said they think the machines do not need to be replaced in the near future.
Prince George's County Schools Superintendent John E. Deasy testified before another House Appropriations subcommittee yesterday, saying that education cuts would harm local school systems.
"Do we need to do more with less? Absolutely," Deasy said. But, he said, state funding is crucial for urban school systems like Prince George's.
Del. John L. Bohanan Jr. (D-St. Mary's), chairman of the subcommittee that Deasy addressed, said that the state has been increasing education funding for years and that it is time for local governments to invest more in public schools.
"At some point, we've got to figure out what's a fair and equitable balance between the counties and the state."
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