Leaders hopeful of OK for tax plan

Busch, Miller less optimistic on slots

October 23, 2007|By Laura Smitherman and James Drew | Laura Smitherman and James Drew,Sun reporters

Legislative leaders in Annapolis said yesterday that they are optimistic that the General Assembly will approve most of Gov. Martin O'Malley's tax package during the special session that will begin Monday.

But Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch said prospects are more tenuous for legislation that could lead to legalized slot machine gambling, an issue that has divided the State House for more than five years.

"I hope with some good luck and some hard work we can have everything completed within a two-week period," Miller said. "That is a very optimistic hope."

Miller and Busch emerged separately from a closed-door meeting in O'Malley's office, each saying he thinks he has the support in his chamber to approve most of a package aimed at wiping out a projected budget shortfall of $1.7 billion in the next fiscal year.

Pressure on the legislative leaders and O'Malley - all Democrats - to line up support for the tax proposals is growing, with lawmakers scheduled to return to Annapolis next week for a special session that could last weeks.

O'Malley plans to hold a new conference with members of his Cabinet today to outline what is at stake if the legislature fails to address the problem.

The governor has met with dozens of legislators in recent weeks, and aides say he is confident that a consensus will be reached. He has yet to clarify whether he plans to ask the legislature to pass a bill allowing slots or a bill that would leave the decision to a voter referendum.

"The governor knows he's going to have to compromise with members of the legislature, and he's willing to do that," spokesman Rick Abbruzzese said. "And he feels that the members he has spoken to are also willing to compromise and come together."

O'Malley has proposed overhauling the income tax structure to lessen the burden on lower- and middle-income Marylanders and to tax top earners much more; raising the corporate income tax rate from 7 percent to 8 percent; and increasing the sales tax rate from 5 percent to 6 percent. He would also cut the property tax by 3 cents per $100 in assessed value and double the cigarette tax to $2 a pack.

The governor met with Miller and Busch yesterday to determine a schedule for the session, which will begin Monday night, when O'Malley will address both chambers.

Joint committee hearings will be held over the following four days to consider O'Malley's proposals, including a daylong hearing that Friday on gambling. Many legislators who are not on key committees might not return to Annapolis until after the committee meetings.

Some Republicans have objected to the short time set aside for the special session, saying that members not on the committees will have little input.

"Only a fraction of the entire legislative body will make these decisions," said House Minority Leader Anthony J. O'Donnell, a Southern Maryland Republican.

The governor and legislative leaders say they must act before the 90-day regular session begins in January because without new revenue, they would have to make difficult budget cuts in areas such as education.

They are also warning legislators that if they don't approve the tax package, their districts could lose an estimated $275 million in new revenue for counties and municipalities.

"People have to understand from a legislative standpoint, if they're not successful, they'll have to be back in January. ... You'll have to pass those cuts back to the county governments or have a new round of revenues," Busch said.

The tax proposals work in tandem, he said. For instance, the sales tax is considered regressive, hurting lower-income families more than upper-income ones, while the income tax proposals are aimed at making the tax burden more progressive.

Miller said he expects a "majority" of O'Malley's proposals to become law, with some changes. For instance, he said the sales tax might not be extended to health clubs and property management.

On slots, the two leaders diverged, as they have for years.

Busch, a slots opponent, said there isn't enough support in the House for the idea and that putting the matter to a referendum - which requires a three-fifths majority in the House and Senate - could also prove difficult.

Miller, who has fought for slots and sided with O'Malley's predecessor, Republican Robert L. Ehrlich Jr., on the issue, said he would prefer to avoid a referendum.

But O'Malley appears to have given up hope of winning approval in the House of Delegates for a bill that would bring slots to the state and possibly as much as $550 million in revenue annually by fiscal 2012, he said.

Some legislators said they have reservations about certain proposals but are reserving judgment.

Sen. Thomas M. Middleton, a Southern Maryland Democrat who is chairman of the Finance Committee, said that a property tax reduction is needed but that "any monkeying with the income tax causes me some concerns," he said.

laura.smitherman@baltsun.com james.drew@baltsun.com

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