Gov. Martin O’Malley yesterday proposed raising about $400 million for transportation and education needs, partly by increasing Maryland‘s corporate income tax and allowing increases in the state gas tax to adjust it for inflation.
Mr. O’Malley, a Democrat, is proposing to raise the state corporate income tax from 7 percent to 8 percent. The gas-tax indexing would increase prices at the pump less than 1 cent per gallon a year, state Transportation Secretary John D. Porcari said.
The plans are in addition to tax increases and reductions that the governor discussed last week to address the state’s $1.5 billion budget shortfall.
Mr. O’Malley is scheduled today to discuss his proposal to legalize slot-machine gambling in the state to raise more revenue to address the shortfall.
Despite criticism from Republicans that the state is spending too much money during tough fiscal times, Mr. O’Malley said the investments in transportation and education are “very, very critical to our quality of life.”
He also said Maryland needs to make the investments because more jobs are coming to the state. Mr. O’Malley said that situation is more favorable than the ones states losing jobs are facing.
Sen. David R. Brinkley, Carroll and Frederick Republican, said the latest proposal is further evidence the state has a spending problem, rather than a revenue problem requiring tax increases. He also said the increases in corporate taxes could hurt business development in the state.
“They’re showing that we’re generally hostile to job creation through the private sector,” Mr. Brinkley said.
Mr. O’Malley announced the proposal yesterday in Gaithersburg, hitting the road again to sell his plan. It was the governor’s fourth day of traveling to locales outside of Annapolis to explain why tax changes were needed.
Mr. O’Malley said the long backups from overcrowded roads already is exacting a very unpleasant and unproductive tax on Maryland residents.
“It’s called a tax by circumstance,” he said. “It’s a tax by our failure to invest, and what we are proposing is an additional $392 million, part of which is this increased corporate income tax yield, to invest in transportation.”
Mr. Porcari said every dollar in the Transportation Trust Fund right now is dedicated to a project in the works. Of the proposed transportation money increase, Mr. Porcari said about $250 million would go toward preserving the infrastructure already in place.
Maryland has about $40 billion in unmet transportation needs.
Other parts of the proposal announced yesterday include:
n Increasing the state’s vehicle-titling tax by 1 percent
n Ending transfers from the state’s Transportation Trust Fund to the state’s General Fund
n Shifting rental-car tax revenues from the General Fund to the Transportation Trust Fund
Under the proposal, the gas tax would be adjusted to make up for the cost of construction index. In other words, the gas tax would increase to make up for the rising costs of materials used in transportation projects, such as steel and concrete. Mr. Porcari estimated that the gas tax would increase seven-tenths to eight-tenths of a penny each year.
Maryland’s 23.5-cent gas tax has not been increased since 1993.
Mr. O’Malley said the education part of his proposal would be aimed at improving infrastructure on the state’s public colleges and universities and at keeping tuition down.
Last week, Mr. O’Malley spent three days traveling across Maryland to discuss his strategy for addressing the budget deficit, including closing corporate tax loopholes. He also proposed changing the state’s tax structure for the first time in 40 years, a plan he said would reduce taxes slightly for about 95 percent of residents while raising taxes for about 3.7 percent of the state’s wealthiest residents — a change that he estimated would raise $163 million a year. Mr. O’Malley also has proposed raising the sales tax by 1 cent, a change that could raise $730 million.