O'Malley wants to revive tax cuts

Senate eliminates proposals aimed at reductions for most Marylanders

General Assembly

November 08, 2007|By Andrew A. Green | Andrew A. Green,Sun reporter

Gov. Martin O'Malley said yesterday that he hopes the House of Delegates will revive some of the tax breaks for middle- and working-class families that a Senate committee stripped out of his revenue-raising package.

The Democratic governor praised senators for moving quickly on his plan to resolve Maryland's projected $1.7 billion budget shortfall, and he gave no indication that he would reject the Senate's version of his bills, which eliminated proposed property tax cuts and income tax reductions for most Marylanders.

"The Senate is the more conservative body, by design," O'Malley said. "The House still has to act."

The fiscal impact of the Senate Budget and Taxation Committee's amendments to O'Malley's plan became clearer yesterday.

The governor has tried to sell his plan to the public by saying that for most families, his proposals to reduce the state property tax and make the state income tax more fair would more than make up for his plan to increase the sales tax from 5 percent to 6 percent. But figures from the Department of Legislative Services show that the Senate's amendments erased any benefits middle-income Marylanders might have received.

The department estimated that a family with an income of $75,000 a year would pay $166 more, and a family with an annual income of $150,000 would pay an extra $332.

Comptroller Peter Franchot, a Democrat who has been critical of the governor's push to legalize slot machines and has argued that the current special legislative session is unwise, blasted the Senate committee's amendments yesterday as a "regressive pounding of working families and the working poor."

"The bulk of the new revenue to be generated from this package will come from two significant regressive sources: the sales tax and slot machine gambling," Franchot wrote yesterday in a post on the blog freestatepolitics.us.

O'Malley said that even if the House of Delegates does not restore some of the progressive elements of his plan, the passage of a slots referendum - and the revenue it would bring - would provide another opportunity to enact them.

"Some senators were reluctant to put in place tax relief for lower-income people or working people without being sure there would be revenue from slots," O'Malley said.

The amended versions of O'Malley's bills got an initial hearing on the Senate floor yesterday, giving the full chamber an opportunity to hear the details of the proposals. Senate President Thomas V. Mike Miller said he plans to consider further amendments today and possibly to reconvene tonight in an attempt to pass the legislation and send it to the House.

Republicans and Sen. James Brochin, a Baltimore County Democrat who has said he will oppose tax increases, grilled committee members on the amendments, particularly the proposed extension of the state sales tax to computer services, landscaping and arcades.

Senate leaders said the services were included because they are considered luxuries, not essential services. However, Republicans continued to question whether the public had an adequate chance to give input.

O'Malley's plan would have expanded the sales tax to cover real estate management, health club memberships and other services. Industry representatives testified against the bill, and those provisions were removed.

"Landscapers, people who have computer-services businesses, people with video-game parlors - were they able to come and testify, or did they just wake up this morning, read the newspaper and realize they were in?" Sen. Richard F. Colburn, an Eastern Shore Republican, asked Sen. Ulysses Currie, the committee chairman, during a floor debate.

"I think you summarized the process," Currie replied.

The services in the bill now aren't necessarily ones that will remain when the legislature finishes its work. House Speaker Michael E. Busch met yesterday with the Democratic delegations from several counties, and those in the meetings said he discussed the possibility of swapping them out for other services, as well as potential changes to the income tax provisions of the Senate's bill.

Busch said in an interview that he expects the Ways and Means Committee to begin moving tax and slots bills tonight and to bring legislation to the floor tomorrow. The House will likely convene Saturday and could take votes on its versions of the legislation that night.

Busch said he doesn't expect major differences with the Senate.

"There'll be some small differences, nuances on both sides, but we'll be within the same realm of closing the budget gap through cuts and revenues," Busch said. "There's not a whole lot of leeway you can take in this."


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