Annapolis is girding for a debate on taxes as the traditional election season stance of "no new taxes" is being worn down by seemingly endless bouts of state budget-cutting.
Gov. Martin O'Malley has slashed spending as tax revenues have fallen and plans to announce about $470 million in further reductions this month. That has prompted some Maryland lawmakers and special-interest groups to suggest looking at the other side of the ledger to get more revenue flowing into state coffers.
One tax proposal that has drawn early backing from a powerful union is an accounting change aimed at preventing corporations from hiding profits in other states, a move that could generate $20 million to more than $150 million, according to varying estimates. In the past, O'Malley has supported such a change despite opposition from the business community, and aides say that he will look at the proposal again next year.
An Internet sales tax is another proposal that has drawn support. Backers say that such a tax would ensure fairness. Under the current system, some online purchases are subject to state sales tax and others are not. An Internet sales tax could generate an estimated $7.8 million a year, according to fiscal analysts.
Legislative leaders and the governor's aides say they have no plans to raise taxes when he and all 188 members of the General Assembly are up for re-election in November 2010. But proponents of the tax changes say that making corporations pay their fair share would be an attractive, populist message to take to voters, especially amid a recession precipitated by shenanigans on Wall Street.
"Certain districts don't have the same anti-tax sentiments as other districts," said Donald C. Fry, head of the Greater Baltimore Committee, an influential business group. "You're going to see a lot of people looking for alternatives, because there's a lot of angst that programs will be significantly impacted by the budget cuts."
The debate over the accounting change, known as combined reporting, is likely to peak this fall when Comptroller Peter Franchot's office releases a long-awaited report on how much the proposal could generate in additional tax revenue.
Efforts to raise tax revenue would surely become political fodder for the GOP. Republicans have criticized the fiscal leadership of O'Malley and the Democratic-led legislature, and many are warning that even if the Democrats do not approve tax increases next year, they will raise taxes to close deficits in future years.
