The Busch plan

March 24, 2004

HOUSE SPEAKER Michael E. Busch has proposed a $670 million package of tax increases and reforms that would, among other things, raise the sales tax by a penny and decrease property taxes statewide by 8.2 cents per $100 in assessed value. It's an ambitious plan that would balance the budget and ensure Maryland's Thornton plan for education could move forward.

It's the best idea yet for solving the state's long-term budget woes and therefore deserves serious consideration. Yet, within hours of its unveiling, Gov. Robert L. Ehrlich Jr. already was talking veto. How disappointing. When Mr. Ehrlich's initiatives are threatened by the legislature, he charges partisan politics. But when he rejects a sensible tax reform package out of hand? Well, you get the idea.

Here's the problem: The state is committed to far more in future spending than the government will receive in tax revenues, a deficit of perhaps $800 million or more next year and much more in future years. Obviously, cutting government is the first option. But the fact is, neither the Democrats in the legislature nor this Republican governor have found much fat to trim after two years of trying.

Thus, the only feasible solution is to raise revenues. Mr. Ehrlich's slots proposal doesn't close the long-term deficit, and comes with unacceptable social costs. His failure leaves lawmakers with only one viable option - Mr. Busch's plan.

Raising the sales tax is not the most politically popular thing to do, and it's regressive. But the fact is, most of Maryland's neighbors charge 6 cents on the dollar now. Under Mr. Busch's plan, poor families would receive a potentially offsetting boost in the earned income tax credit. Better still, the speaker's plan to lower property taxes means that the average family with a $100,000 income and a $300,000 home might pay about $10 more in taxes, total. That's three days of lattes for an eventual billion-dollar boost to public education. Not a bad deal.

But wait, it gets better. Mr. Busch would increase the state income tax from 4.75 percent to 6 percent on top wage earners - individuals making at least $150,000 and families making $200,000 - for the next five years. That's fair - first, because these are folks who are likely to get the biggest benefit from Mr. Busch's property tax relief, and second, because they're the ones who have gotten the most out of President Bush's federal tax cuts.

Finally, the plan raises corporate income taxes from 7 percent to 7.9 percent (still keeping Maryland's tax on businesses among the lowest in the region) to better fund state colleges and universities, a $65 million boost that should provide some tuition relief.

Are these outrageous ideas? Not at all. Mr. Busch has taken the grown-up approach to balancing the budget. No gambling schemes or political payoffs involved. He's identified areas where Maryland's tax rate is relatively low and boosted them. With a little help from an economic recovery (and continued budgetary restraint), his proposal can solve the state's structural deficit.

The biggest obstacle is knee-jerk partisanship. No politician wants to be caught voting for taxes. Mr. Ehrlich, who has embraced plenty of fee and tax hikes himself, would be wise to drop the attitude, forget the veto threats, and join the conversation.

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