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Hogan says he'll seek tax cuts

Erin Cox
Contact ReporterThe Baltimore Sun
Governor Larry Hogan plans to unveil part of his plan for the Maryland General Assembly session today.

Maryland Gov. Larry Hogan said Thursday he will ask the General Assembly to grant "modest" tax cuts to working families, small businesses and retirees.

But the Republican governor offered no details on his proposed cuts nor on how he would pay for them.

Flanked by a row of colorful charts about the state's improving financial picture, Hogan began building a case that Maryland can afford to reduce taxes, as he promised voters during his campaign for governor.

"Those who will benefit the most under our tax proposals will be the ones who have been suffering the most," he said.

He said the state expects a $300 million surplus next year and is in better financial standing than during the eight years under his Democratic predecessor. Democrats countered that the rebounding economy had far more to do with Maryland's financial health than Hogan's policies after less than a year in office.

Hogan paired his proposed cuts, which would take effect over five years and total $400 million, with a call for what he described as "mandate relief." He said his top priority during the 90-day legislative session that begins next week would be to persuade the Assembly to reverse laws dating back to the 1950s that constrain how the governor can spend about 80 percent of state revenue.

"It's completely absurd, it's unsustainable and has to end," Hogan said, blaming spending mandates for causing financial troubles during recessions.

Those mandates require the state to spend increasing amounts of money each year on education, health care and public safety. Democrats contend that paring back those spending requirements is tantamount to calling for larger class sizes, spotty health care and diminished public safety.

"This is not the 'change,' I think, he promised voters," said Sen. Richard S. Madaleno Jr., a Montgomery County Democrat, using Hogan's "Change Maryland" campaign slogan as a jab.

"He loses when he talks about cutting education," said Madaleno, vice chair of the Senate budget committee. "He can't talk about what he wants to do because he will lose that argument. Instead he hides behind 'mandate.'"

Removing mandates would shift more authority back to the governor and away from the legislature, where Democrats have long held significant majorities.

Hogan unsuccessfully sought other cuts to long-term spending rules last year. This year, he is proposing that such cuts take effect only when mandated spending outpaces state revenue.

Hogan also said he will fully fund every mandate required under state law in next year's budget. The announcement was expected by top lawmakers but nonetheless carries political significance in how budget debates may play out over the next three months.

Every year since 2008, the governor and legislature have passed a bill making one-time tweaks to spending mandates, legislation that serves as a way to negotiate how money should be spent. Hogan's announcement that he will not tinker with individual spending mandates removes an avenue for such negotiations.

Hogan also warned lawmakers that if they try unilaterally to set aside money for their priorities, he will refuse to spend it.

Last year, for example, Democrats designated $68 million for 13 school districts, including Baltimore, where the cost of educating children is higher. Despite attempts to pressure him, Hogan did not relent.

"To my friends in the General Assembly, let me be very clear: Fencing off money will not work. We will be happy to hold on to the money," Hogan said.

House Speaker Michael E. Busch, a Democrat and one of the governor's chief political sparring partners, said he could not comment on Hogan's proposals because they lacked details.

But Busch said that, in general, the legislature is open to considering changes to taxes and convened a group known as the Augustine Commission to issue recommendations that are due soon. Those changes, he said, should be broad and comprehensive, and any tax breaks would have to be paid for in some way.

"The issue is tax restructuring to make it fair for everyone," Busch said in an interview. "I don't think it's beneficial to do targeted tax cuts or credits that detract from your core mission."

Hogan, the state's second Republican governor since the 1960s, was elected in 2014 on a promise to curb state spending and reverse tax increases. Democrats rebuffed several of Hogan's efforts last year to trim taxes. They did agree to repeal a law requiring a stormwater fee derided by critics as a "rain tax."

Hogan also offered a preview of his budget, announcing he would spend a lot more money on road projects and limit state borrowing to $995 million, which effectively caps how many construction projects can move forward. The figure is about $60 million lower than what was recommended by a bipartisan panel of state legislators. Hogan said the state has borrowed too much without creating a plan to repay it.

"Basically, we're paying down the bar tab that they walked out on," Hogan said.

Madaleno said Hogan was misleading the public about the state's finances, adding that Maryland has a surplus because of budgeting decisions made years ago by Democrats.

A Hogan aide said the budget calls for state workers to get a raise but would not say how much it would be.

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