New Taxes

WASHINGTON -- The tax-writing panel of the House voted yesterday to boost taxes paid by managers of many investment firms, as part of a broader tax-relief plan for millions of households who would owe extra money this year under the alternative minimum tax (AMT). The action by the House Ways and Means Committee ignited a struggle that will be played out in the coming days, as members battle over plans to prevent the AMT from hitting 23 million households this year. More broadly, the debate yesterday was a preview of conflicts over economic policy that will be heard in the presidential campaign and after next year's election.

ONCE WHEN Paul Hindemith, composer of very modern music, was rehearsing one of his especially dissonant compositions, he interrupted the orchestra, saying, "No, no, gentlemen. Even though it sounds wrong, it's still not right."Contemporary politics, a kind of atonal music, produces moments like that. Consider Rhode Island Democratic Rep. Patrick Kennedy's proposed legislation to succor the yacht industry and assuage the pains of its most put-upon customers.The Omnibus Budget Reconciliation Act of 1990 was the budget agreement by which President Bush broke his "read-my-lips" vow not to agree to new taxes.

The key to overcoming the state's negative business reputation is regulatory reform and fewer taxes, Carroll County's General Assembly candidates told the local Chamber of Commerce last night.The state needs to cut capital gains taxes, continue to reduce income taxes and spend more money on building highways and less on developing mass transit, said the 10 Republicans and two Democrats who participated in the political forum in Westminster.But that won't happen, said incumbent state Sen. Larry E. Haines of Westminster, unless a Republican occupies the governor's mansion in the fall.

YOUR JAN. 26 editorial, "Income tax cut = jobs," attempts to rewrite the long Republican fight for an income tax cut for all Marylanders. Republicans have long believed Maryland is a tax hell, and that the income tax burden severely dampens the economy and kills job growth. We have consistently fought for a 24 percent income tax cut over four years.The first step is a 6 percent cut to increase the personal exemption from $1,200 to $2,200. A family of four could shield $8,800 of income from state tax, instead of the current $4,800.

Baltimore households would have to spend about $52 more a year in new energy sales taxes under a plan by Mayor Kurt L. Schmoke to offset a projected multimillion-dollar shortfall in the city's budget next year.Schmoke wants each city household to pay a 4 percent energy sales tax -- a levy on residential use of natural gas, electricity, steam, fuel oil and other fuels. He also wants to place a 2 percent energy tax on nonprofit organizations and an 8 percent tax on manufacturers.The new taxes -- which would be the first broad-based tax increase under Schmoke -- would help balance the mayor's $2.3 billion budget for the fiscal year that begins July 1. Schmoke's plan will be presented today to the Board of Estimates, a panel of five top city officials.

Looking warily to the 1998 elections, Democratic leaders in the House of Delegates tried yesterday to generate legislative momentum for tax relief with a new plan to cut the income tax by 10 percent over three years.The tax cut proposal -- designed to bridge broad policy differences within the legislature's majority party -- would be balanced in part by new taxes on many telecommunications services.After intense behind-the-scenes negotiations the past several days, House Speaker Casper R. Taylor Jr. unveiled the omnibus tax bill and convened a special meeting of the 100 Democrats in the House to discuss it and to press for party unity.

Taxes are The Other Certainty. The General Assembly's now taking bows for cutting personal income taxes in Maryland 10 percent over the next five years, but the legislators will make up for it by finding some new, previously unimagined way to put their hands in our pockets.As Franklin P. Adams once wrote:Count that day won whenTurning on its axisThis earth imposesNo additional taxes.Fat chance. Something new is just around the bend, only they'll dress it up with a fancy name, like "revenue enhancer."

WASHINGTON -- Democrats and Republicans lauded themselves for this week's budget compromise -- and there seemed to be enough credit to go around: From House Speaker Newt Gingrich and the GOP come a $500 child tax credit and capital gains cuts designed to spur new businesses. From President Clinton and the Democrats come deductions for college expenses and guaranteed health care for the children of the working poor."The American people spoke when they elected a Democratic president and a Republican Congress," proclaimed Senate Majority Leader Trent Lott.

Faced with a barrage of complaints, Mayor Kurt L. Schmoke backed away yesterday from his plan for new energy sales taxes in Baltimore to close a multimillion-dollar gap in next year's budget.A month after beginning his unpopular quest for a broad-based tax increase, Schmoke said he was "rethinking" the budget and looking for cost savings throughout city government."There is less enthusiasm now for the energy tax than there was several weeks ago," he said at a news briefing. "It's not dead yet, but we are trying our best to come up with ways of not only closing the budget gap but also improving efficiencies."

The electronic tote boards on the marble walls high above Maryland's House of Delegates chamber showed enough "Yes" votes for a Democratic win - another drubbing for the eternally over-matched Republicans.The House would follow its Democratic leader, Casper R. Taylor who wished to delay consideration of a GOP tax cut proposal. Later, later, said House Speaker Taylor. Not the right time. Cart before horse.Enough said in a Democratic legislature. Or was it?Not this year. Not nearly enough. Of 141 delegates, only 41 are Republican, but they are speaking with a voice that belies their size.

Editorialists at major American newspapers have a history of magical thinking when it comes to taxing us. How many times have we read editorials urging higher taxes as the preferred solution for any perceived governmental budget problems? Liberals have a catechistic response to most any demand for greater social spending: Raise taxes and get on with it. They seem ignorant of one of the basic laws of economics, which is that taxes discourage production. The more a thing is taxed, the less you get of it. This is why the huge expenditure of money by the federal government in the name of "stimulus" cannot possibly make up for the wealth destroyed by the taxes extracted from the productive economy to pay for it. As we know, the current economic crisis has provoked the levying of some new taxes and fees by governments all across the nation, but these are insufficient to address the growing gap between what's needed to keep our swollen governments solvent and the continuing shrinkage of tax revenues they collect.

Last week, Maryland Comptroller Peter Franchot released his office's analysis of the Board of Revenue Estimates for fiscal year 2009. The report shows that the estimated revenue for 2009 will be a little more than $430 million short of what was previously announced. Mr. Franchot goes on to say that the Maryland legislature and the governor's office will need to cut spending in order to help offset the estimated shortfall of revenue. The comptroller's analysis offers some interesting points to consider.

Referendum's wording could mislead voters The wording of the ballot question relating to the constitutional amendment authorizing video lottery terminals may be misleading to voters ("Slots opponents drafting suit over ballot wording," Aug. 26). As drafted by the secretary of state, the wording of the ballot question states that the constitutional amendment would authorize the state to issue slots licenses "for the purpose of raising revenue for education of children in public schools," and goes on to describe a number of the various ways in which this money will be spent on education.

Senate President Thomas V. Mike Miller spent yesterday personally drumming up votes for a plan to repeal the unpopular tax on computer services, which is scheduled for a key committee vote today. "We're going to do some polling," Miller told senators on the floor yesterday. "When we come around, please don't run." With less than a week left in the annual legislative session, the most contentious issue left to the General Assembly is how to balance a nearly universal desire to scrap the $200 million computer services levy with an equally strong aversion to enacting new taxes.

Gov. Martin O'Malley threw his support behind a growing effort to repeal a $200 million tax on computer services and suggested yesterday that Maryland's wealthiest residents ought to help make up the difference with a surcharge on their personal income taxes. The governor, a Democrat, said it was unfair to expand the sales tax to just one industry and echoed the sentiments of many lawmakers who believe the application of the levy was not thoroughly vetted when it was approved in November.

Asking why we tax isn't right question There are three things certain in life - death, taxes and The Sun's editorial pages coming to the rescue of Gov. Martin O'Malley whenever he finds himself in hot water. Not surprisingly, The Sun agrees with the claims of Mr. O'Malley that the structural deficit had to be addressed and that without new taxes, "essential government services" would have a "grim" outlook ("Why we tax," editorial, Jan. 24). Both claims are without merit. As to the first argument, only relatively nominal cuts in the budget were made by Mr. O'Malley, such as the elimination of jobs that were not even occupied.

No wonder Sen. President Mike Miller couldn't reach Sen. Jim Brochin to give him the bad news. The night before the General Assembly session began, Brochin stuffed his ears with plugs and switched his cell phone off. Not that Brochin could have heard the ringtone anyway, what with all the racket at the Hannah Montana concert. The 43-year-old Towson Democrat spent Tuesday night in a sea of shrieking tweens, among them, Brochin's 9-year-old daughter, Katherine. But don't let the chaperone duty and earplugs fool you. At the risk of alienating the classic rock vote, Brochin said that Montana is better in concert than Bruce Springsteen - at least the aging Bruce.

Taxes in Maryland are going up this week. It's regrettable, but certainly no worse than any other price increase. Government has to be paid for the same as mortgages or milk. At least there's comfort in knowing that higher tax rates will allow the state to avert a projected $1.7 billion budget deficit next year. And everyone will be getting a bit more for the money - more aid for schools and colleges, more help with health care costs, better roads and transit. Yet even as the new rates settle in (changes to most, such as the income tax, are already in effect while the extra penny in the sales tax arrives tomorrow)

In 1988, George H. W. Bush uttered his iconic sound bite, "Read my lips: no new taxes." He ate those words two years later, then endured the backlash in 1992. That should have been a clue that "no new taxes" was too simplistic to fit the actual state of our fiscal needs. Twenty years later, the sound bite is harder on the ear. The first crop of baby boomers (those born in 1946) are about to qualify for early Social Security benefits starting Jan. 1. Projected Social Security and Medicare shortfalls, soaring spending, huge deficits and recession worries all suggest revenues will contract and budgets will tighten to the point where further tax cuts would make matters worse.

The governor of Maryland recently brought to mind the majestic though scary sight of astronauts floating outside their spacecraft, endeavoring to make repairs. Walks in space are usually successful, but the peril is inescapable, along with the questions: Does he have the right tools? Will the tethering umbilical hold? Can the work be done in one walk, or will another be needed? Will the support crew do its job? Maryland's ship of state had soared into the remoteness of deficit spending before Gov. Martin O'Malley arrived in Annapolis.