State tax revenues outdo expectations

Schaefer report credits improved economy in Md. for fiscal 2005 gains

July 15, 2005|By Andrew A. Green | Andrew A. Green,SUN STAFF

Thanks to rapid improvement in Maryland's economy, state tax revenues increased sharply at the end of fiscal 2005, Comptroller William Donald Schaefer said yesterday, a development that makes it easier for lawmakers to balance their election-year budget.

Schaefer reported that personal income and corporate tax revenues grew more than 17 percent in the fiscal year that ended June 30, contributing to total state revenues that were $391 million more than lawmakers had anticipated for the year.

That's $141 million more than the figure Schaefer reported two months ago, and the number could go higher when the books are closed on fiscal 2005 next month.

"This is good news for the state," Schaefer said in a news release. "But it's important to remember that this is not `extra' money. A great deal needs to be done over the coming years to address concerns in education and rising Medicaid costs."

Lawmakers approved the fiscal 2006 budget with an extra $400 million in surplus money, and because these new revenues came in too late to be spent in that year, the governor and General Assembly will have nearly $800 million extra to spend in fiscal 2007, the last budget they will craft before the 2006 election.

The new revenues aren't enough, however, to eliminate the gap over the next several years between what the state is expected to spend and what analysts predict it will collect in taxes, a projection known as a "structural deficit."

Schaefer reported yesterday that revenues from tobacco and gasoline taxes remain flat, but all other sources of state revenue increased in fiscal 2005. Sales and use taxes were up 7 percent, and lottery sales increased by 4 percent.

Schaefer spokesman Michael Golden said much of the increase is due to Maryland's hot real estate market. Federal law exempts from taxes the first $500,000 in capital gains from the sale of a home for joint filers and the first $250,000 for individuals, but in some parts of the state, the increase in housing prices has been so rapid that more homeowners find themselves paying the tax.

Income tax withholding has also gone up, as have corporate taxes, due in part to the closing of tax loopholes, Golden said.

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