Tax Package

The Baltimore City Council passed $30 million in increased telephone, energy and real estate taxes last night, part of a $2.1 billion budget that - despite the new revenue - still calls for cutting some municipal jobs and services. Finalized in a daylong series of meetings, the tax and budget package was the result of unusually tough bargaining between the council and Mayor Martin O'Malley, who had sought $45 million in higher taxes to stave off deep cuts in the budget year that will begin July 1. O'Malley thanked the council for increasing tax revenues, which he called a politically painful but necessary step to avoid such quality-of-life cuts as less-frequent trash collections and fewer police officers on city streets.

All that stands between Baltimore and its next budget are two City Council meetings, two committee work sessions, a Board of Estimates vote and untold arm-twisting as the council and Mayor Martin O'Malley try to cut some jobs and services, save others, and work out the important details of at least $30 million in new taxes. Not bad for a day's work. City officials expect to complete a flurry of meetings today that will finalize a tax package and a $2.1 billion budget, even though some of the most basic particulars - how millions of dollars will be raised and spent - remain up in the air. While Baltimore budgets often pass in down-to-the-wire style, some council members and observers say that seems especially true now, less than two weeks before the new fiscal year starts July 1, because all the last-minute maneuvering will shape the heftiest tax package in memory.

IN THE debate over Baltimore Mayor Martin O'Malley's proposed tax package, the arguments, pro and con, turn on the city's progress. The mayor says the additional revenue generated by new or higher energy, phone and recordation taxes will enable the city to continue its strides in reducing violent crime, improving school performance and keeping the city clean. Raising those taxes, say some City Council members, will impede the city's progress. "A real dent" is how Council President Sheila Dixon characterized the impact.

FACED WITH the prospect of paying more in taxes to use cell phones, consume energy and buy property in town, Baltimoreans have every right to ask if the city is doing more with less. They have every reason to press Mayor Martin O'Malley for evidence that he has economized; after all, city residents are hit with the highest property tax rate in Maryland. But as the debate over Mr. O'Malley's $45 million tax package proceeds, tax-averse city residents also must ask themselves what they are willing to do without.

A steady procession of business leaders told City Council members yesterday that Mayor Martin O'Malley's proposed tax package will stifle Baltimore's real estate market and make it more expensive for companies to operate in the city. Representatives from the real estate, telecommunications and nonprofit industries expressed opposition to two elements of the mayor's three-pronged tax plan aimed at eliminating a projected $40 million deficit for the fiscal year that begins July 1. The council's taxation committee held hearings yesterday on O'Malley's proposed $3.50 monthly tax on traditional and wireless phones and a proposed increase in fees for recording real estate purchases, from 0.55 percent to 1 percent.

In a day of high political drama, leaders in the House of Delegates all but offered yesterday to pass Gov. Robert L. Ehrlich Jr.'s cherished slots initiative if he would bend on their proposed tax increases. Ehrlich, however, promptly rejected the offer and dared the legislature to kill the slots bill immediately rather than link it with higher levies. House Democrats convened a passionate if packaged lunchtime news conference, warning that the state budget would face a gap of more than $800 million in coming years even if Ehrlich's proposal on gambling becomes law. "There is a hole in this budget that is bigger than life, which no one wants to address," said House Speaker Michael E. Busch, deriding Ehrlich's slots plan as a giveaway to racetrack owners.

At first glance, Jeff Hazard would seem to be a tailor-made opponent of the $670 million tax increase that cleared the state House of Delegates last week. One day soon, the 30-year-old Baltimore man will probably earn a big enough salary at his corporate job to see dollars sliced from his paycheck with the higher tax bracket lawmakers have in mind for well-off Marylanders. What's more, Hazard and his wife, Kristie, are expecting a baby any day. So they will be shelling out a load of money, plus sales tax, on all kinds of new purchases.

The Maryland Senate gave preliminary approval yesterday to a $23.6 million state budget despite complaints from Republicans that a $159 million tax package used to balance it is excessive and unnecessary. Majority Democrats fought back a Republican attempt to scuttle a proposed 5 percent sales tax on potato chips, popcorn, nuts and other salty snack foods, which are exempt from the sales tax. The $16 million it would raise was needed to compensate for incorrect health care spending estimates from Gov. Robert L. Ehrlich Jr., Democratic leaders said.

The chairwoman of the House committee that oversees gambling said yesterday that she will not permit slots legislation to move forward unless Gov. Robert L. Ehrlich Jr. agrees to a tax package of at least $500 million - a demand that could prove insurmountable. "Our position is that if there is going to be a slots bill, we want it to have another revenue source," said Del. Sheila E. Hixson, a Montgomery County Democrat and chairwoman of the House Ways and Means Committee. "We're not going to do slots unless we have taxes, too."