Agreement reached on plan to increase taxes

Funds will prevent 'Doomsday' budget cuts

May 09, 2012|By Michael Dresser and Annie Linskey, The Baltimore Sun

Gov. Martin O'Malley and legislative leaders announced Wednesday an agreement to raise taxes on 16 percent of the state's earners and reverse a series of so-called "Doomsday" cuts the General Assembly enacted last month when a budget deal collapsed.

Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, both Democrats, said they have lined up the votes to approve the plan, including the super-majority needed in the Senate to break any Republican filibuster attempt.

O'Malley called the special session, starting Monday, to stave off about $512 million in cuts that became the de facto law when legislators failed to complete work on the budget before the regular General Assembly session ended April 9. Those cuts would have fallen heavily on education, health programs and state employees and slashed state aid to Baltimore, Prince George's and Montgomery counties — the three strongest Democratic jurisdictions.

"To leave the budget as it stands right now would damage the very forward motion that all of us working together are trying so hard to achieve for our state," O'Malley said at a news conference with Busch and Miller at the State House. "A cuts-only approach would help no one and it could hurt all of us."

The budget fiasco was an embarrassment to Democratic leaders, who failed to protect their interests despite controlling both chambers. And it reflected poorly on O'Malley, who is thought to have national ambitions. By the same token, the state's minority Republican Party has delighted in using the mess as an example of poor governing.

House Minority Leader Anthony J. O'Donnell said Wednesday that the Democratic plan to raise taxes is "outrageous."

"They are going to come in and kick the citizens of Maryland again when they can hardly put gas in their cars and put food on their tables," said O'Donnell, of Calvert County.

He predicted many of the votes needed to pass the plan will come late, with little public debate during a brief session. "Most criminals want to perpetrate their crimes very quickly and quietly without scrutiny," he said.

The agreement reached by the governor and legislative leaders essentially resurrects a deal crafted by the Senate and House in the waning hours of the regular legislative session.

Under the plan, individuals who make more than $100,000 in adjusted gross income, and couples who earn more than $150,000, would pay higher rates and get a smaller break in personal exemptions. Rate increases on those high-earning Marylanders would range from one-quarter to three-quarters of a percentage point.

According to state Budget Secretary T. Eloise Foster, the income tax package would add about $247 million to the state's revenues next year.

During the annual General Assembly session, the Senate had wanted a broader-based increase that would have affected more Marylanders and raised more money. Negotiations between the two chambers turned into a form of budget brinkmanship — complicated by the emergence of casino gambling as a hot issue in the last days of the session. In the end, the House prevailed in its insistence that the impact of tax increases be limited to high earners.

The agreement came too late to win final passage before midnight, however.

After the session, Miller and Senate negotiators — still fuming over what they regarded as the House's intransigence — talked about reopening negotiations on the tax increase before holding a special session. But Busch pointed to the signed agreement the two sides reached the final night and insisted that it be honored.

"Some days you're the bear, some days the bear eats you. I got et," Miller said. He said the House "just didn't have the votes" for a larger tax package.

The problem with the House package, Miller said, is that it doesn't address the remaining $500 million gap between projected spending and revenues — the so-called structural deficit. He said the legislature would have to deal with the gap again next year.

As expected, the agreement to be debated in the special session does not deal with Miller's proposal to expand casino gambling in Maryland. The Senate president wants to allow a sixth casino in the state, to be built at National Harbor in Prince George's County, and to allow table games at all of the state's casinos.

O'Malley said yesterday that he has asked Miller and Busch to appoint members of their chambers to a work group on gambling. It would be charged with looking into such issues as market saturation and tax rates for casinos, and would report back in time for a possible second special session in late summer.

But Miller conceded that it is not certain the group would reach a consensus. Without such accord, he does not expect a second session.

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