Gov. Martin O'Malley outlined a menu of potential revenue-raising measures yesterday that could come close to bridging Maryland's $1.5 billion budget shortfall, including increases in the sales tax and the income tax on high earners.
In a meeting with The Sun's editorial board, the governor made no specific proposals and presented his ideas in theoretical terms. But on a variety of topics - including budget policy, slot machines, transportation, health and crime - he foreshadowed the direction he might take as he approaches the critical second legislative session of his term.
O'Malley also signaled a potentially important change in how the state will deal with criminal offenders. He said the state would base decisions on the level of post-release supervision on their number of arrests instead of just convictions.
FOR THE RECORD - A summary box on Page 1A of yesterday's editions of The Sun incorrectly described a sales tax increase that Gov. Martin O'Malley said could raise $600 million to $700 million in additional revenue. The governor was referring to a theoretical 1-percentage-point, or 20 percent, increase in the state's 5 percent sales tax.
The Sun regrets the error.
During his discussion of budget issues, O'Malley was outspoken in his support of "a progressive income tax" - expressing dissatisfaction with a current system that taxes all income above $3,000 at the same 4.75 percent rate.
"It is a very flat tax," the Democratic governor said. "We've certainly been looking at the pack of progressivity on that score."
O'Malley said that changes to make the tax more progressive - that is, raising it for higher-income individuals - could raise about $100 million to $200 million annually.
Raising the 5 percent sales tax to 6 percent, he said, could bring in $600 million to $700 million. Closing what he considers "loopholes" in Maryland's corporate income tax laws could raise $100 million more, the governor said.
Legalizing slots at racetracks - a move O'Malley has consistently supported - could eventually bring in $400 million to $600 million, he said. The governor noted that it would take several years to reach that level and expressed a preference for directing any slots revenue into capital projects - such as building schools or transportation facilities - rather than depending on them for operating expenses.
While O'Malley did not commit to taking any of these steps, the figures - when added up - come very close to the roughly $1.5 billion the state needs in either spending cuts or revenue increases to balance its budget.
The second year of a governor's term is traditionally regarded as the critical one for enacting the more controversial elements of an administration's policies. As O'Malley noted with amusement, lawmakers prefer to cast tough votes - such as those on taxes - early on.
