- The Washington Times - Saturday, May 5, 2007

During the 2007 session of the General Assembly, Maryland Senate President Mike Miller was a pleasant surprise, proving to be a major obstacle to the brand of one-party liberalism that Gov. Martin O’Malley and many General Assembly Democrats thought they had won a mandate for in November. Mr. Miller blocked efforts by Mr. O’Malley and House Speaker Michael Busch to pass a major expansion of Medicaid, and the General Assembly left town last month without hitting Marylanders with any large-scale tax increases. But that is likely to change dramatically in the coming months.

Mr. Miller told The Washington Post on Monday that in order to close the state’s $1.5 billion budget shortfall, he could envision imposing a tax surcharge on some upper-income Marylanders; raising state sales taxes, applying the sales tax to a wider range of services and increasing gas taxes. But he promised that General Assembly Democrats are “not going to make the state of Maryland tax hell.” How comforting. Mr. Miller is not prepared to wait until next year to increase taxes. Instead, he calls for a special session of the General Assembly to consider the issue in the fall. Mr. Busch, by contrast, opposes such a session, while Mr. O’Malley has yet to take a position on the issue

To be fair, Mr. Miller’s major concerns are the overall fiscal health of the state and the need to balance the budget as required by law. In addition to the above-mentioned tax increases, which we oppose, he advocates slot machines at race tracks, which we favor. In his interview with The Post, Mr. Miller offered a few vague hints that he he also favored reductions in education spending (which has skyrocketed in recent years) and in land preservation programs. But in contrast with the Senate president’s generalities about budget cuts, there is plenty of pressure in this liberal-leaning state for vast expansions in the size of state government, and many politicians are ready to oblige. For all the talk in Annapolis about the need to deal with Maryland’s “structural deficit,” Mr. O’Malley and many Democrats in the legislature have put forward an ambitious list of new spending initiatives in areas such as health care, transportation, and K-12 education and higher education.

For politicians in jurisdictions like Montgomery County, Prince George’s County and Baltimore, bragging about what they have done to secure “full funding” of the public schools (functional and dysfunctional alike) is critical to staying in office. One of the biggest fiscal time bombs awaiting Maryland taxpayers is the bill to expand Medicaid to provide health care for the estimated 800,000 uninsured in the state. The legislation passed the House of Delegates this year, before Mr. Miller buried it. But a political ally of Mr. Miller, Sen. Thomas “Mac” Middleton, the Charles County Democrat who chairs the Senate Finance Committee, wants to tie the discussion of Medicaid to the debate over “revenue” (i.e., tax increases). Then there is transportation, where Mr. O’Malley has identified 54 projects made necessary by military base relocations in Maryland. The state has funded approximately $6 billion worth of the projects, which are supposed to be completed by 2011; the projected cost of the projects is approximately $22.3 billion. (By way of comparison, the total Maryland General Fund Operating Budget for the current fiscal year is $13.2 billion.)

The bottom line: When you look at the projected deficits and all of the projected spending increases the governor and most of the General Assembly are contemplating, Marylanders are staring some huge tax increases in the face. Following are some of the possible increases mentioned in a speech by Sen. P.J. Hogan, a politically savvy Montgomery County Democrat who is vice chairman of the Budget and Taxation Committee and a political ally of Mr. Miller. The ideas floated by Mr. Hogan are very similar to predictions made earlier this year by the Manufacturers’ Alliance of Maryland (MAM), a business advocacy group that closely monitors taxes and regulatory issues:

m An increase of one cent in the state sales tax.

m An expansion of the state sales tax to cover additional services.

m An increase in the personal income tax.

m Hiking the gasoline tax.

m Increasing the tobacco tax.

m Increasing the corporate income-tax rate from 7 to 8 percent.

In his interview with The Post, Mr. Miller suggested raising the sales tax from 5 to 6 percent. He said legislators should consider applying the sales tax to a range of services but refused to specify which services. (Past proposals have included automobile repairs, barbershop visits, parking garages, car washes, interior decorators, public lockers and public-relations firms.) The governor has stopped just short of endorsing Mr. Miller’s proposal to add 12 cents onto the current gasoline tax rate of 23.5 cents per gallon, and his bill includes a mechanism that automatically increases the tax rate as gas prices increase. Given the realities that: 1) the budget is in deficit and must be brought into balance and 2) the governor and the General Assembly are preparing to go on a spending binge, Marylanders face a tsunami of higher taxes in the next few years.

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