Raise Taxes

The Sun's Andrew A. Green recently offered a comprehensive, historical account of Maryland's structural deficit. You know what that is, right? It's the difference between committed spending and expected income. When legislators commit to spending not covered by anticipated income, the state has a structural deficit. Over some lengthy period, the built-in shortfall has become the governmental version of the weather: Everybody talks about it, but nobody does anything about it. Actually, that's wrong.

Over my 17 years in the Maryland legislature, I've observed four different governors experience budget challenges. William Donald Schaefer, Parris N. Glendening and Robert L. Ehrlich Jr. acted immediately when a budget problem loomed. Unfortunately, our current governor, Martin O'Malley, chose not to act during this year's General Assembly session, and simply balanced the state's budget on the $1 billion surplus left by the Ehrlich administration. A year of delay and indecisive leadership has greatly increased the deficit and the pressure for new taxes.

A bill that supporters say would put "truth" in Maryland's property tax system without changing the amount people pay passed the House of Delegates yesterday.Critics suggest the legislation will lead to higher taxes, and the bill's fate in the Senate is uncertain.Under the bill, which passed 100-38, local governments would no longer tax residential and business properties on 40 percent of their assessed value. Property would instead be taxed at 100 percent of its value, and local tax rates would be cut to 40 percent of what they are now.The result would be that people would pay the same amount in taxes, but their tax rate would be lower.

Only one issue spurred lively discussion at the Carroll delegation's annual forum on legislative proposals: a suggested increase in the real estate transfer tax.As they have done in two previous years, the County Commissioners are asking for an increase of one percentage point -- to 4 percent -- in the transfer-tax assessed on all real estate settlements. The revenue would help pay for a 20-year-old program to preserve agriculture land.The six-member delegation has not offered any support to the bill.

Republican Councilman Dennis R. Schrader fired the first shot in the general election campaign for Howard County executive yesterday, labeling his Democratic opponent James N. Robey a "captive" of employee unions, an opponent of tax cuts and a waffler on issues.Robey, the former police chief, rejected what he called Schrader's "trashy" attack, assailing it as rife with inaccuracies and questioning Schrader's character for mounting such a negative offensive. He countered that it is Schrader who changed his positions on issues such as growth and the county's trash fee solely to court voters.

City budget analysts, those traditional bearers of bad news, are delivering a surprisingly rosy report about city finances for the second year in a row.Baltimore can expect a surplus of more than $25 million this year, they say -- a prediction that has battle lines forming between the mayor and City Council over how to spend the excess cash.This year's windfall comes from the same sources as last year's $15 million surplus -- increased revenue from income and real estate taxes, parking revenue and higher-than-expected investment proceeds from the fire and police pension fund, which is tied to the booming stock market.

COULD THERE HAVE BEEN a worse time for Charles I. Ecker to receive the fiscal advice he's hearing these days?The Howard County executive is mulling a campaign for the Republican gubernatorial nomination as a social moderate and strong fiscal watchdog. But over the last three weeks, two teams of advisers have suggested that he diverge from a straight-and-narrow conservative path and raise taxes or increase fees, in part to relieve some of the county's ponderous debt burden.The most recent call for higher taxes comes from the county's Spending Affordability Advisory Committee, a panel Mr. Ecker himself created to help begin the annual budget process.

The Board of County Commissioners may tinker around the edges, but members don't expect to make major changes in Carroll's proposed 1997 spending plan at today's scheduled budget work session.The commissioners will set the tax rate -- which they proposed increasing by 27 cents per $100 of assessed value -- and vote on the county's $162 million operating and $82 million capital budgets at 11 a.m. tomorrow.The proposed tax increase -- the county's second in two years -- drew praise and created a furor at a May 9 public hearing that did little to change the commissioners' minds.

BALTIMORE CITY and Carroll County are separated by a dozen miles geographically and by far greater distance politically. But they now find common ground, in the most unlikely of places -- the need to raise taxes.The current tax proposals from Baltimore Mayor Kurt L. Schmoke and the Carroll County commissioners are the most dramatic illustration of pressures on government finances. This trend echoes throughout the region: Baltimore County Executive C. A. Dutch Ruppersberger incurs heat for offering police officers raises but not firefighters; he says the times demand a judicious approach.

Councilwoman Sheila Dixon, a key ally of Mayor Kurt L. Schmoke, is leading a charge against the mayor's push to increase the piggyback tax by trying to revive the bottle tax.Mrs. Dixon intends to introduce a bill Monday that would add a 2-cent tax on beverage containers of 16 ounces or less and a 4-cent levy on larger sizes. The tax, which is being phased out at the insistence of the previous council, has generated about $6.1 million yearly.The proposal comes as the City Council and Mr. Schmoke begin a two-month wrangle over the city's $2.3 billion budget.

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.

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.

The executive director of an influential group representing top transportation officials from around the country told a Greater Baltimore Committee summit Thursday that it is time for the United States to "grow up" and increase the federal tax on gasoline and other motor fuels. John Horsley, executive director of the American Association of State Highway and Transportation Officials, warned that without new revenue, the U.S. transportation infrastructure faces a grim future. "We're in the soup," Horsley warned the gathering of Baltimore business leaders, transportation officials and civic activists.

So President Barack Obama, presiding over what will surely be the biggest budget deficits in history, doesn't want the country to go bankrupt. "If we do nothing, then we will continue to see red ink as far as the eye can see," he said at a news conference two weeks ago. He'll summon a "fiscal responsibility summit," he told The Washington Post last week. America, he said, must make "hard decisions" about Medicare, Social Security and other expensive programs. Hard decisions, of course, will include cutting costs and benefits, which will anger Democrats.

Through a long campaign, President-elect Barack Obama made a mantra of his pledge to raise taxes on the wealthy and cut them for the struggling middle class. But now it seems likely that the rich won't be paying more, at least for a year or two, because any tax hike would be bad for the country's morale in the current economic struggle. That's what Mr. Obama's aides have suggested. That may be a campaign promise not kept, but ducking the tax issue is a convenient bit of recession theory that fits seamlessly with what appears to be the Bush administration's economic game plan.

CORAL GABLES, Fla. - Acutely aware of the delicate nature of the situation and its increasingly central role in the presidential race, both candidates moved cautiously yesterday in their proposals for what to do about the financial crisis on Wall Street. Democratic Sen. Barack Obama and Republican Sen. John McCain both called for bipartisanship amid a search for government remedies on a day when the Department of Treasury said it was crafting a plan to rescue banks from billions of dollars in bad debt.

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.

Sen. John McCain and the Republicans like to say that they would keep taxes low while Sen. Barack Obama and the Democrats would raise your taxes. But there is at least one area where a McCain administration would raise taxes on lower- and middle-income earners and on businesses. There was very little discussion at the Republican convention about health care. Mr. McCain referred briefly to his health care plan in his acceptance speech, but there are some important details of his plan that he conveniently left out. His health care plan would give all Americans a tax credit to purchase insurance, whether or not their employer offered coverage.

When Maryland doubled the cigarette tax to $2 a pack, some residents may have found a reason to quit. Smugglers, on the other hand, seem to have found a motive to step up their activities. Since the tax increase took effect in January, agents with the Maryland Comptroller's Office have seized more than 46,000 packs of contraband cigarettes - smokes brought illegally across state lines. That's a nearly four-fold increase from about 13,000 packs seized over the same period in 2007. And in the largest bust so far this year, agents confiscated nearly 8,000 cigarette packs after stopping a man driving a Chevrolet Astro van on Interstate 495 this month.

WASHINGTON - Sen. John McCain tried yesterday to relaunch his campaign with a pledge to use broad-based tax cuts to revive the ailing economy - and a string of barbs contrasting his views with Sen. Barack Obama's. "The choice in this election is stark and simple," McCain, the presumptive Republican nominee, told a town hall meeting in Denver. "Senator Obama will raise your taxes. I won't. I will cut them where I can." Obama, the presumptive Democratic nominee, countered yesterday by challenging McCain and promising that he wouldn't raise taxes on anyone who makes less than $250,000 a year.