Bad State Tax Policy

November 17, 1991

Dedicating tax revenues to specific government activities is all the rage among special-interest groups. But it is dreadful tax policy that should be resisted strongly by legislators.

Backers of the state's shock-trauma system want a new "trauma tax" earmarked exclusively for preserving and enlarging emergency medical services. Supporters of the University of Maryland College Park want to cut funds for mass transit and road building and dedicate that tax money instead to college campuses. The Maryland Higher Education Commission wants to go even further, seeking higher business taxes to protect community colleges from recessionary budget cuts.

All of these programs are important to the state's well-being. Yet none of them should be placed in a privileged category that makes them immune from reductions at budget time. State government needs all the flexibility it can muster when times are tough so it can juggle funds and determine which programs should receive the most help. Dedicated taxes would rob Annapolis of that vital fiscal mobility.

Once the trend is started, every interest group will press legislators and the governor for its own dedicated tax. Why not a "trooper tax" to preserve the State Police? Or a "library tax"? Or a "worker tax" to ensure job security for state employees regardless of changing economic, demographic and societal circumstances? Or a "fire tax," a "foster care tax," a "Legal Aid tax," a "welfare tax," a "bay tax," or a "homeless tax"?

The list of worthy programs supported by Maryland's government is long. Even in the best of times, there isn't nearly enough revenue to pay for all of them. Nor is there ever enough money to give these programs the kind of all-out financial support that they deserve. It becomes a juggling act in which the governor and General Assembly allocate funds based on the state's available cash; mandates from Washington and the courts, and the state's own priorities.

It is this clash of special interests vying to reach the state's priority list that groups now want to circumvent through dedicated taxes. This would, indeed, safeguard such groups from economic downturns. But it would severely restrict the state's ability to respond to social emergencies. And in a recession, it would force truly Draconian budget cuts on programs that are not given the elite status of having their own dedicated tax.

For instance, if College Park and other campuses are able to divert $80 million in transportation funds, it would force cancellation of dozens of road and commuter-rail projects. Any dedicated tax would mean either new levies on the public or stripping money away from social programs already bleeding from 15 months of budget retrenchment. That's not fair. It certainly isn't a sensible way to run state government.

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