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Maryland tax revenues falling short

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Tough economic times have pushed Maryland's tax collections down about 17 percent in April, and general revenue is on pace to fall well short of state forecasts for the rest of this year, according to state Comptroller Peter Franchot.

To date, the state has collected just under $9.9 billion in revenue, about 3.5 percent less than the comparable period in 2008. In April, the state collected $1.57 billion, which is 16.6 percent less than what was collected the previous April.

In his monthly letter to state legislative leaders, Mr. Franchot said that two-thirds of the revenue drop can be attributed to a substantial decline in individual tax returns. In April 2008, the state collected $1.2 billion in individual income taxes. Last month, that number fell to $985 million, or a 17.4 percent decrease.

"There is very little good news to be found with the individual income tax," Mr. Franchot wrote.

Overall, Mr. Franchot says, the state is on pace to collect $130 million less than what forecasters predicted for fiscal 2009, which ends in June.

"It is clear that the income tax will fall short of the full-year estimate... and there is little reason to expect performance to improve over the next two months."

Corporate-, sales-,and tobacco-tax collections have shown growth, however. Mr. Franchot said those are only because of tax increases passed during the 2007 special session of the General Assembly. So far, corporate-tax revenue is up 6.3 percent, sales-tax revenue is up 1.4 percent, and tobacco- and alcohol-tax revenues are up 17 percent.

Lottery revenue in April was down 7.4 percent, although sales were up about 9 percent. Mr. Franchot attributed that to a string of good luck by Maryland bettors in Pick 3 and Pick 4. Thanks to Pick 4 winners, for example, though sales were up 10.7 percent, revenue was down a "staggering" 50 percent.

The drop in revenue will prompt the state Board of Public Works - made up of Gov. Martin O'Malley, Mr. Franchot and state Treasurer Nancy K. Kopp - to consider further cuts in state spending.

During the 2009 session of the General Assembly, lawmakers approved more than $866 million in spending reductions because of a lag in state income, while the budget gap is expected to increase to over $1 billion for fiscal 2010.

Sen. Allan H. Kittleman, Carroll Republican and the Senate minority leader, said that the revenue figures were "further evidence of a lack of leadership" by Mr. O'Malley, a Democrat, with respect to the budget, and was proof that increases to state income-, corporate- and sales-tax rates passed in 2007 did not help improve revenue.

"It says that the tax increases passed in 2007 certainly did not help us," said Mr. Kittleman. "The Democrats have a strong appetite for spending, and if we continue like this we're only going to dig ourselves a deeper hole."

Mr. O'Malley said through a spokesman that the decrease in revenue is "a symptom of the national economic downturn."

"These numbers are not entirely unexpected. The governor is aware of the fiscal situation and he, along with the Board of Public Works, will identify the cuts necessary to address these new figures," said O'Malley spokesman Shaun Adamec.

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