As alternative to slots, tax on wealthy is better than cuts

January 09, 2004|By MICHAEL OLESKER

NOW THE Ehrlich administration holds slot machines over the heads of schoolchildren like a bludgeon. You don't give us slots, we don't give you the money we promised for the public schools, warns the governor's budget secretary, James C. "Chip" DiPaula Jr. And don't even think about raising taxes to cover the difference, the governor of Maryland continues to insist. Folks, if Pete Rose can finally admit he has a gambling problem, why can't Robert L. Ehrlich Jr.?

Next week, when the great political thinkers of our time convene in Annapolis, the Ehrlich people can make their case for gambling salvation once again. Only slot machine money can save us from economic ruin, they declare. But a year ago, facing the same troubles, they botched their slot machine pitch so embarrassingly that it still stirs reaction somewhere between a snicker and a sneer.

But nobody snickers at the red ink - an estimated $780 million budget shortfall facing the state - and we can only sneer at an administration that campaigned for office promising to support education funding no matter what, and now claims it can happen only if we roll the dice a little.

Here's a thought for everybody: some brand-new survey numbers indicating more citizens favor a tax increase than Governor Ehrlich seems to imagine. But it's a specific kind of a tax increase, aimed at people who can actually afford it.

Such a tax increase is a fine idea. It is a better idea than cutting public school funding or raising college tuition or cutting health care for poor children, all of which are the grim (but apparently "acceptable") alternatives if slot machines fail again.

So here are some numbers for the governor to ponder, from a Gonzales Research and Marketing study, conducted last month, in which respondents were asked a simple question: "To help close this year's budget deficit, would you favor or oppose raising the state income tax rate by 3 percentage points - on households that earn more than $500,000 per year?"

Across the state, 58 percent favor raising the income tax rate for those making such money. Only 33 percent oppose it. That includes a 68 percent favorable vote among Democrats, 43 percent among Republicans (and 8 percent undecided), 67 percent among women and 49 percent among men.

And, in Maryland's voter-heavy areas, it includes 77 percent approval in Montgomery and Prince George's counties, and 67 percent in Baltimore.

"The numbers are very clear," says Tom Hucker, executive director of Progressive Maryland, the coalition of labor, religious and community organizations that advocates for working families. Progressive Maryland sponsored the poll.

"What they indicate," says Hucker, "is that people understand those who benefit the most need to contribute their fair share of taxes. And, when the governor says otherwise, he's out of step with Maryland values."

Hucker made his remarks, two days ago over lunch, just a few hours after a breakfast meeting at which Ehrlich's budget secretary, DiPaula, spelled out the vulnerability of the so-called Thornton plan to add $1.3 billion yearly to public school funding.

"Without slots, we cannot afford" the Thornton plan, DiPaula said, adding, "Governor Ehrlich is not going to raise income taxes. He is not going to raise sales taxes. He is not going to tax our way out of this problem."

On the same day, Ehrlich confirmed that he will introduce new slot machine legislation this year. But he would not disclose any details of the plan, which might differ from last year's slots-at-racetracks initiative that was passed by the Senate but was killed by the House of Delegates.

As it happens, I side with the governor on his original proposal - slot machines at racetracks. The reason is simple: It's hypocritical to say we can't have gambling at a venue where we already have gambling - and further hypocritical to say government shouldn't be in the gambling business when we're already up to our necks in state lottery games.

But Ehrlich's intransigence on taxes - particularly, increased taxes on the wealthy - is a different business. Yesterday, the Institute on Taxation and Economic Policy, a Washington-based research center that advocates tax reform, issued a report saying that low- and middle-income families in Maryland pay larger shares of their income in state and local taxes than the richest families.

The study found that the richest 1 percent of Marylanders - those with average incomes of $1.1 million - pay 7.6 percent in state and local taxes. But it's 5.1 percent after federal itemized deductions. Middle-income families ($33,000 to $51,000) pay 9.5 percent, 8.8 percent after federal deductions. Poor families (earning less than $19,000) pay 9.4 percent and, according to Robert S. McIntyre, author of the study, "They tend not to itemize, so the rate stays the same. Essentially, it means the tax rate on the poor is over half again as much as the effective rate on the wealthiest."

As the governor's financial experts draw the line on taxes - and threaten school funding if they don't get slot machines - they ought to take a look at such figures. And at those other figures, showing that most Marylanders think it's time for the rich to carry their share of the load.

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