- The Washington Times - Thursday, March 6, 2003

ANNAPOLIS The Ehrlich administration yesterday vowed to veto tax increases on alcoholic beverages, cigarettes and personal income proposed by Democratic lawmakers looking for revenue solutions outside slot-machine gambling.
"The governor does consider alcohol and other taxes off the table," said Ehrlich spokeswoman Shareese N. DeLeaver.
Gov. Robert L. Ehrlich Jr., a Republican, has promised to hold the line on taxes. Legislators would have to consider deep budget cuts if they defeat the governor's bid to legalize slot-machine gambling at horse tracks.
Mr. Ehrlich, whose earlier budget projections called for as much as $395 million in new revenue from slots in the first year, announced late yesterday, however, that his newest proposal will reduce the state's share of proceeds.
The governor cut the licensing fee he had hoped to collect from track owners from $350 million to $120 million a move that will also reduce the gambling industry's contributions to school funding. Administration officials said the share of the tracks was substantially increased because the costs of building facilities and operating the slots palaces were underestimated.
Slots, even with a reduced share for the state, are needed, the administration says, to help balance a $1.2 billion budget shortfall in fiscal 2004.
Without slots or more taxes, cuts are likely to be made to popular social programs and government services.
Some Democratic lawmakers brushed aside Mr. Ehrlich's veto threat.
At Senate hearings yesterday, Sen. Nathaniel J. McFadden, Baltimore Democrat, and Sen. Ida G. Ruben, Montgomery Democrat, reiterated their support for higher taxes on alcohol and cigarettes, respectively.
Meanwhile, a slew of tax bills is making its way through the legislature, heading to almost certain doom on the governor's desk. The only tax measures Mr. Ehrlich would consider are raising the gasoline tax and tightening some preference in corporate tax laws, Miss DeLeaver said.
The tax bills in the House include raising the sales tax from 5 percent to 6 percent, upping the gas tax 7 cents per gallon, imposing the insurance-premiums tax on health maintenance organizations, and temporarily increasing the income tax rate to 6 percent for individuals earning more than $100,000 a year and couples earning more than $150,000.
Delegate William A. Bronrott, Montgomery Democrat, introduced a bill to raise alcoholic-beverage taxes from $1.50 to $5.12 per gallon for distilled spirits, from 40 cents to $1.28 per gallon for wine, and from 9 cents to 64 cents per gallon for beer.
He said the changes would raise more than $95 million a year.
Yesterday, the Senate Budget and Taxation Committee held hearings on a handful of tax proposals, including doubling alcoholic-beverage taxes and raising the cigarette tax from $1 to $1.36 per pack, as well as a package of corporate-tax reforms.
The Senate bill Mr. McFadden signed on to doubles the alcohol tax and earmarks that additional revenue for the Maryland Emergency Medical System Operations Fund.
Mr. McFadden, a member of the tax committee hearing testimony yesterday, challenged members of the beer and liquor industries to donate equivalent funds to the system rather than suffer the tax. He said the system, which provides trauma care throughout the state, is a vital service in need of added funding.
"Think about your child in an accident on the Eastern Shore, in Ocean City or in Western Maryland, anywhere. And we don't have a trauma network," he noted for a panel of beer and liquor merchants.
Mrs. Ruben sponsored another bill that would increase alcohol taxes from $1.50 to $3.50 per gallon for distilled spirits, from 40 cents to $1 per gallon for wine, and from 9 cents to 25 cents per gallon for beer. It would reap about $85 million the first year but just $73 million the second year because of increased cross-border sales, nonpartisan legislative analysts said.
Mrs. Ruben, committee member and lead sponsor of the tobacco-tax bill, grilled cigarette retailers and wholesalers who testified against her legislation. She dismissed their arguments that a tax increase would chase their cigarette profits and the state's tax revenue to neighboring states with lower tobacco taxes and to tax-free cigarette suppliers on the Internet.
"I did not put this in for revenue reasons. I put this in for health reasons and health care," said Mrs. Ruben, who has long promoted high tobacco taxes to discourage smoking and defray costs of treating tobacco-related diseases.
Michael H. Kanfer, chief financial officer of Rockville-based cigarette wholesaler Century Distributors, said his medium-size company saw sales to the District and Virginia jump by 800,000 packs a month after the 34-cent tax increase last year.
"Cross-border sales are killing the treasury in this state," he said.
Mr. Ehrlich has used the same logic to support slot-machine gambling, with millions of Maryland dollars plunked down every year into slot machines in Delaware and West Virginia.

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