Maryland lawmakers appear to have more than a few quibbles with Gov.Martin O'Malley's proposal to raise taxes to help eliminate a projected $1 billion shortfall next year. So, with six weeks left in the legislative session, they are preparing to rewrite the budget game plan through some combination of spending cuts and new taxes.
Marylanders will recall the last time the General Assembly decided to take the initiative on taxes — specifically, a plan to broaden the sales tax base. Their last-minute, seat-of-the-pants deliberations in 2007 gave use the much-reviled "tech tax" (a 6 percent tax on computer services) that was repealed before it could even go into effect.
So what do House and Senate leaders have in mind this time around? In the Senate, they are already preparing the customary "doomsday" budget to demonstrate how painful a spending-cuts-only approach would be. But there's also talk about any number of alternatives, ranging from reviving the "millionaire's tax" on high-income earners to increasing income tax rates for everyone to once again broadening the reach of the sales tax.
It's also not clear what lawmakers intend to do about the governor's plan to shift to local governments greater responsibility for financing teacher pensions. Most jurisdictions are up in arms over the cost-shifting (as are teachers), but the potential $240 million savings to the state budget is an awfully strong selling point to tax-averse legislators.
We can't speculate on what might result from the sausage-making process. In theory, it's perfectly reasonable to put any number of options on the table, including spending cuts (although several years of lean budgets mean further reductions are likely to hurt vital health and education services). But we can identify the direction in which lawmakers ought to be headed.
Step One: Do no harm. The governor's budget may require some tough votes, but it strikes the best balance of any proposal we've heard so far. The pension shift is overdue and allows local governments to recoup some of their costs through anticipated "piggyback" income tax revenues. Mr. O'Malley's plan to reduce (thought not eliminate) certain income tax deductions is appropriately targeted at higher earners. Those principles need to be preserved in any alternative budget plan.
Step Two: Be open. In 2007, the tech tax emerged, in part, because lawmakers worked fast and furious — and without careful consideration and sufficient public input. Too often, tax policy is influenced more by lobbyists representing deep-pocketed clients than the public interest. Sunshine is usually the best cure for such wheeler-dealing.
Step Three: Think long-term. It's relatively easy to paper over a one-year deficit, but if legislators are serious about eliminating the state's structural shortfall, it requires permanent taxes or permanent spending cuts. What are the state's priorities? Is it outstanding public schools or slightly lower tax rates? Job creation or happy county executives and councils?
Step Four: Think big. Delegates and senators ought to understand that no matter what they decide, some voters won't be happy. If tough medicine must be swallowed, better to take a heaping spoonful now and not be forced to take some more again next year, or the year after, or the year after that. That means such important matters as the gas tax (to finance future transportation projects) and flush tax (to restore the health of the Chesapeake Bay) ought not be shoved aside simply because neither helps balance next year's general fund budget.
Step Five: Stand tall. Voters aren't idiots. They are capable of understanding when difficult choices have to be made. If you choose to raise taxes — as we believe is inevitable, given the alternatives — be prepared to explain what taxpayers are getting for the money.
Unfortunately, budget deliberations present a process that often rewards bad behavior by lawmakers. Those who oppose taxes can seem heroic in the eyes of their constituents, particularly if they never have to live with the consequences of budget cuts. Others won't look beyond the needs of their district, no matter the hardships faced elsewhere.
The antidote for this is strong leadership, not only from the presiding officers but from Governor O'Malley, particularly if he wants to prove his executive mettle to the rest of the country. He should not just leave the fate of his budget up to the whims of the House and Senate but should fight for his priorities, both in the State House and in public opinion. The legislative session is already half-over, and as difficult as the same-sex marriage vote may have been, the budget won't be much easier, at least not if they do it right.