Busch to call for tax boost

House speaker wants to raise sales tax, sets sights on high earners

`We're going to shake things up'

Plan sets up showdown for Democrats, Ehrlich

General Assembly

March 22, 2004|By David Nitkin | David Nitkin,SUN STAFF

Maryland House Speaker Michael E. Busch plans to ask Democrats in the House of Delegates today to endorse increases in the sales tax and income tax on wealthy residents, a long-term budget-balancing strategy that would put them on a collision course with Gov. Robert L. Ehrlich Jr. and the state Senate with just three weeks to go in the legislative session.

If the speaker gets his way, lawmakers and lobbyists said, majority Democrats will throw their support behind an increase in the state sales tax from 5 percent to 6 percent, and the creation of a higher income tax bracket for Marylanders earning more than $200,000 yearly. The increases would generate $760 million for state coffers, but Democrats will propose earmarking $200 million or more to reduce the state portion of the property tax on homes and businesses.

Ehrlich implemented a property tax increase last year of about $100 for an average homeowner in a budget-balancing move.

"We're going to shake things up this week," Busch said in an interview yesterday. "We're going to have some fun."

House Democrats will meet this morning and could announce their tax plan later in the day. Details were being discussed last night, however, and several lawmakers said they were awaiting firm word of what Busch desires.

Lawmakers are poised to approve a $23.6 billion state budget passed by the Senate that is balanced for the fiscal year that begins July 1 without taxes or slots, but faces a $1 billion revenue shortfall the following year because of anticipated education and health spending increases.

Busch spoke with the governor about his intention to advance a tax package during a private dinner of crab cakes and beef at Government House last night. "I told him we were putting a revenue package together," Busch said later. "He was gracious enough to hear me out. ... I said, `Be gentle on us,' and we'll see where it goes from there."

Ehrlich, a Republican, has steadfastly opposed new taxes, and promised to veto any sales or income tax increase.

The governor used the dinner to seek compromise with the speaker on Ehrlich's slot-machine gambling proposal, which has been approved by the Senate for the second straight year.

Meeting this week

After the dinner, Ehrlich press secretary Greg Massoni said he did not know all the details of what was discussed.

"They spoke about slots, medical malpractice, the budget. The speaker brought up taxes. They thought they made progress and they are scheduling a meeting for later this week.

"The governor remains steadfast against raising the sales or income taxes," Massoni said.

A slot-machine gambling plan will not be part of the proposal advanced by Busch, but could be added later as the measure goes through the House, party members say. Whether Busch will allow Ehrlich's gambling bill to come to a vote remained unclear.

The emerging House position contrasts sharply with the desires of Ehrlich and the state Senate, and solidifies Busch's position at the liberal edge of the state's political spectrum. Democrats hold 98 seats in the 141-member House, a veto-proof majority if party members remain unified.

"I don't think he's too liberal for the D.C. suburbs, but I think he's too liberal for the rest of the state," said Sen. James Brochin, a conservative Democrat from Towson. "I don't think he reflects Maryland, especially with a Republican governor right now."

In adopting a budget last week, the Senate approved a more modest $226 million package of new revenues that included $16 million from a new sales tax on salty snack foods, the closing of certain corporate loopholes and the removal of recent federal breaks on sport utility vehicles and estates from Maryland income tax bills.

"The position you saw from the Senate is as far as the Senate is willing to go," Brochin said.

House Democrats should have asked voters for their thoughts on raising taxes during the 2002 elections, said House Minority Whip Anthony J. O'Donnell of Charles County.

"They run from it during an election, then they foist it on the citizens afterwards," O'Donnell said.

With his proposal for slots and spending cuts, "Governor Ehrlich is the only one who has proffered a reasonable plan without cranking up taxes inordinately," O'Donnell said.

But Busch believes that broadly applied taxes - rather than slots and a variety of fees proposed by the administration - is a preferable way to pay for the continuing mandates of a $1.3 billion-a-year public school funding plan, as well as Medicaid and other needs.

Busch said that a majority of Democrats will support higher taxes to pay for education. In a poll for The Sun in January, 65 percent of respondents said they would favor a 1-cent increase in the 5-cent per dollar sales tax if the proceeds went to the education plan.

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