- The Washington Times - Friday, August 10, 2007

ANNAPOLIS (AP) — Gov. Martin O”Malley”s administration gave an update yesterday on plans to address the state”s $1.5 billion deficit, saying reforms will include closing corporate tax loopholes and demanding that the wealthy “pay their fair share.”

The governor, in a statement released yesterday, voiced plans to “reform our tax system in a way that makes it more modern, more inclusive and more fair.” Mr. O”Malley also said the tax system needs to be made “more fair for the working families of our state who have been taking it on the chin for the last few years.”

“This will mean closing loopholes for big giant corporations and — yes — demanding that the wealthiest among us pay a fair share,” Mr. O”Malley said in the statement, which was taped last week before he went on vacation.

Mr. O”Malley, a Democrat, has been considering several tax changes for months. He also has been in talks with House Speaker Michael E. Busch, Anne Arundel Democrat, Senate President Thomas V. Mike Miller Jr., Prince George’s Democrat, and other lawmakers about how to tackle the $1.5 billion structural deficit facing the state next year.

“Getting our state’s fiscal house in order is not an end,” the governor said. “It is a means to achieve bigger and more important goals, like strengthening and growing our middle class, improving public safety and public education and the affordability of college so that we can also expand opportunity for the working people of our state.”

Maryland currently has a flat income tax. People who make $3,000 or more a year are put in the highest category.

Mr. O’Malley didn’t offer any details about how much taxes would be raised or how the loopholes would be closed. He also said his administration has cut the state budget by $280 million.

Mr. O’Malley and legislative leaders also have been considering raising the state’s sales tax from 5 percent to 6 percent, raising the state’s gasoline tax and legalizing slot machine gambling.

Sen. David R. Brinkley, Frederick Republican, said that without details, he was concerned that the governor’s plan to raise taxes on businesses and the wealthy would be hostile to economic development.

“We can take care of this problem without raising taxes, and we called earlier this week on the governor to propose a zero-increase budget,” said Mr. Brinkley, the Senate minority leader.

Senate Republicans held a caucus Tuesday in Annapolis, calling on the governor to submit a fiscal 2009 budget that “protects Maryland’s citizens from the onslaught of new taxes.” Mr. Brinkley contends that the deficit could be eliminated by 2011 under the Republican plan.

Sen. Paul G. Pinsky, who has long been an advocate of tax reform called “combined reporting,” praised the governor’s remarks. Combined reporting restricts companies from avoiding taxes by incorporating subsidiaries in other states, such as Delaware.

Mr. Pinsky said it remains to be seen what the details of O’Malley’s plan regarding corporate taxes and taxes on the wealthy will be, and that discussions are continuing.

“How much comes from those two sources is a big question,” said Mr. Pinsky, Prince George’s Democrat.

A preliminary report last month from Comptroller Peter Franchot’s office found that 64 of Maryland’s largest 132 for-profit companies, ranked by payroll, paid no corporate income taxes for the 2005 tax year.