After several years of budgetary sleight-of-hand that saw funds transferred from one pot to another to keep the state budget in balance, it is clear that something must be done to deal with an expected $1.5 billion shortfall in next year's spending plan. Despite Gov. Martin O'Malley's efforts to trim spending, it appears inevitable there must be revenue increases. But any tax increases must be distributed fairly and not fall too heavily on those who can least afford them. That means adjusting the income tax, not the sales tax.
We can all share a little guilt about the "structural deficit." We all want quality schools. In 2002, Gov. Parris Glendening and the General Assembly responded with the Thornton plan, which pumped $1.3 billion more in state funds for education. I did not hear any complaints when Governor Glendening and the legislature in 1998 reduced income taxes by 10 percent, adding $800 million to today's deficit. Throw in overwhelming public support to expand health care and hold down college tuition, and it is clear Maryland's present revenue stream cannot meet the priorities citizens want.
But how we got to this situation is not nearly as important as what we do about it now.
The Sun has reported that Maryland's top political leaders intend "to push a variety of revenue-increasing options, ranging from a penny increase in the sales tax to an increase in the gas tax to allowing slot machines at race tracks."
A penny increase in the sales tax sounds simple enough, and many legislators have told me they think it is a politically safe choice. Maryland political history does not bear this out, however. Consider Gov. William Preston Lane's re-election loss over a one-cent sales tax in the 1950s. Gov. Blair Lee III raised the tax in the 1970s and lost the next election, and Stephen H. Sachs ran on raising the sales tax in the 1980s and lost as well.
Bear in mind, a one-cent sales tax increase is a 20 percent increase in arguably Maryland's most regressive tax. Maryland should not solve its fiscal problem by putting a disproportionate burden on the backs of those least able to pay. And Marylanders who live paycheck to paycheck have less ability to avoid the increase by shopping online or taking a trip to the Rehoboth outlets.
Will a Democratic governor and an overwhelmingly Democratic legislature follow Republican orthodoxy by raising taxes on consumption but not wealth or income?
