Monday, October 1, 2007

It’s a time-tested script. Liberals enact mandated spending increases and create a structural deficit, while claiming to be fiscally responsible. The structural deficit becomes a real deficit, and we have a budget crisis. The governor makes minor budget reductions. The drumbeat for higher taxes begins. The governor calls a special session. Increased taxes and expanded gambling are rolled out as a “Progressive Revenue Reform Package.” Progressives (liberals) bicker over slots. Finally, they reunite to “compromise” and “courageously” pass a revenue (tax) package. They slightly reduce two taxes, raise every other tax, pass slots and tell you that only the rich will pay more.

Democrats haven’t deviated from this script yet. Gov. Martin O’Malley‘s “centrist” budget created 1,000 new state jobs, increased spending by 7.6 percent, exceeded tax receipts by $1 billion and consumed former Gov. Robert Ehrlich’s $1 billion surplus. Yet House Speaker Michael Busch called it a “fiscally responsible budget that limited growth.” Ignoring fiscal reality, the General Assembly cut Mr. O’Malley’s budget by less than 1 percent ($200 million) and added millions in new mandated spending to next year’s $1.5 billion deficit.

The legislature had barely adjourned when calls for a special session started. Mr. O’Malley cut a few of the 1,000 new vacant jobs created in his budget. He labeled additional reductions as “threats to our quality of life.” Then Mr. O’Malley hit the campaign trail, pitching Maryland as a lightly taxed, revenue-starved state: Government needed to “create more revenue.” Taxpayers “got their money’s worth,” and higher taxes would “maintain our quality of life.”

The facts contradict Mr. O’Malley’s tax-and-spin roadshow. Maryland has the ninth-highest total tax burden per person, and the third-highest income tax in America. Those who claim Maryland taxes are “low as a percentage of income” should remember people, not percentages of income, pay taxes. Maryland’s cost of living is high. BG&E, despite Mr. O’Malley’s campaign promises, increased power bills by 50 percent in June; gas prices are near $3 per gallon; and property tax assessments increase annually. Working families, small businesses and retirees not only deserve to keep their hard-earned dollars; they need them.

Mr. O’Malley is wrong about revenue. Government doesn’t create revenue. It simply consumes the tax dollars you earn. Maryland doesn’t have a deficit because we fail to tax enough. Maryland has a deficit because we spend too much. State spending has increased by $15.3 billion over 10 years — more than 100 percent.

Do Anne Arundel County residents “get their money’s worth” from state taxes? Anne Arundel County gets 24 cents in state aid for each dollar of state taxes collected within our county. We received $4,356 in state education aid per pupil. (Baltimore City received $11,235 per pupil.) We’re fourth from the bottom in state aid. The same formulas that mandate increased state spending, including Thornton funding, also distribute more of your tax dollars to other counties. We pay more state taxes, and we receive less. That’s “progressive?”

Are your taxes well spent? Three years ago, Baltimore City couldn’t account for $40 million in state education money. It disappeared. The nonprofit Advocates for Children and Youth discovered that $500 million of Thornton funding slated for summer school and tutoring had been used instead for general budget items, including health benefits, salary increases and heating. They also noted that Maryland student scores on independent national tests had failed to improve, despite a $2.2 billion increase in education funding since 2002. Students have performed only marginally better on state tests.

Mr. O’Malley claims his revenue reforms put money in your pocket. But it doesn’t stay there long. His income-tax restructuring cuts taxes for families making between $50,000 and $125,000 by $176. Property taxes on a $350,000 home are reduced $105, for a total savings of $281. However, Mr. O’Malley’s $1.3 billion in regressive taxes (sales, gas, car titling), which are paid by 2.1 million Maryland households, would cost an average of $585 per household. On average, each household is now out $304. That’s not even considering the adverse impact of Mr. O’Malley’s taxes on businesses and jobs.

The political success of the governor’s regressive-progressive tax increase hinges on convincing us that only the rich pay more. Unfortunately, there aren’t enough wealthy people in Maryland to cover a $1.5 billion tax increase. The next best thing is to make it appear there are by “progressively” raising their taxes and slightly reducing middle-class income taxes. But that only generates $163 million in revenue. The sales tax and other regressive taxes generate $1.3 billion in revenue. Sure, the wealthy pay higher taxes; but so will everyone else. Just follow the money.

It would be nice if this show had a happy ending. But with this cast of characters, what did you expect?

Herb McMillan, a Republican, served in the Maryland House of Delegates from 2003 to 2007.

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