March 23, 2004

IN ANNAPOLIS today - with three weeks left in this year's legislative session - the House committee that last year stopped the governor from legalizing slot machines in Maryland will take up a raft of bills on the fractious issue. The hearing marks the start of the countdown in this year's game of slots-and-taxes chicken between Gov. Robert. L. Ehrlich Jr. and state House Speaker Michael E. Busch.

For Maryland's sake, a minimally acceptable outcome would boil down to a repeat of last year's showdown in which Mr. Busch prevailed over both Mr. Ehrlich and state Senate President Thomas V. Mike Miller, stalling their drive for slots.

Better yet would be the passage of state tax increases enabling Maryland to make certain progress against its long-term structural deficit without resorting to slots.

But best of all would be a fatal blow delivered to slots by a negative vote of the entire House, a denial that could make it more difficult to resurrect the issue next year.

As it is, Maryland's body politic has taken a full year to arrive at the same standoff as last year - with Mr. Ehrlich holding to his vow of no new taxes (despite increasing a long list of fees and taxes) and Mr. Busch blocking slots, particularly at the state's racetracks, in favor of raising taxes.

In the meantime, the budget problem for the 2005 fiscal year beginning in July essentially has been solved. But beyond that, the basic question remains: How best to meet projected deficits that grow from more than $1 billion in 2006 to almost $2 billion a year by about 2008?

Also unchanged are the possible solutions: some combination of slots, new taxes, more spending cuts and better-than-expected state economic growth.

Given that, Mr. Busch yesterday sounded the most responsible note, unveiling a plan to increase the state sales tax rate from 5 percent to 6 percent and putting a five-year tax surcharge on the highest 3 percent of incomes. Some of this added revenue would be offset by lowering state property taxes and low-earners' income taxes - netting $670 million a year to dent the projected deficit (at a modest cost of less than $100 for most Marylanders).

As this endgame now begins, Mr. Busch's tax proposals are a useful reminder that Maryland can solve its fiscal problems without opening this state to the enduring damage that slots inevitably would bring.

Slots backers will try to cast Maryland's taxes as already too high. But Maryland now ranks 45th in the nation in its sales tax burden. And according to the Tax Foundation, its ratio of total taxes collected per $1,000 of residents' personal income is far less than Delaware's and West Virginia's and only slightly more than Pennsylvania's and Virginia's.

The next three weeks likely will see fast and furious politicking. Mr. Busch's tax plans may not survive; the governor yesterday blasted them as a nonstarter. If that's the price of killing slots again this year, so be it. We applaud Mr. Busch's stand - and call on the House to act just as responsibly.

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