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Advocates line up in defense of Maryland taxes

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Sensing an election-year push to cut taxes in Maryland, advocates of environmental, health and social service programs are plotting to ensure that that doesn't happen.

The call by some politicians to repeal a stormwater fee, cut the corporate tax rate or otherwise deliver relief to the business community has energized advocates who spent years persuading Annapolis to raise more cash for state programs. They are determined to convince the public and lawmakers that cutting taxes in 2014 is a bad idea.

"We're calling it offense on the defense," said Halle Van der Gaag, executive director of the environmental group Blue Water Baltimore, which supports the stormwater fee derided by critics as a "rain tax."

Various camps have formed focus groups, commissioned studies or launched behind-the-scenes advocacy efforts to demonstrate that the taxes they championed serve a public good.

One group argues that a reduced corporate income tax would mean cuts to nonprofits that provide much of Maryland's social safety net. Others contend that a repeal of the stormwater fee would be major setback in the fight against pollution flowing into the Chesapeake Bay.

Henry Bogdan, director of public policy for Maryland Nonprofits, said the election-year rhetoric forced advocates to try to stop the momentum for tax cuts.

"If we do nothing, we're probably going to have some cutbacks," he said.

The push for tax cuts includes calls by four of the six gubernatorial candidates to reduce the state's corporate income tax, and some local officials want the stormwater fee repealed. Legislative leaders, including the speaker of the House of Delegates and the president of the state Senate — have spoken in favor of both general and specific tax relief after years of increases.

But the election-year focus on tax cuts doesn't necessarily mean that any will be enacted.

"Nobody is going to come in and say the corporate income tax rate needs to be lowered and that's the end-all, be-all," said Del. John L. Bohanan Jr., the St. Mary's County Democrat who chairs a business climate work group formed by House Speaker Michael E. Busch. "It's not at the burning-crisis level where people say, 'That's it.'"

But advocates and political observers say Maryland's history of enacting crowd-pleasing laws in election years gives them reason to worry and cause to launch campaigns against them.

In 2002, an election year, the General Assembly adopted a landmark plan to increase funding for schools. The costly program was instituted just as a graduated income tax cut passed in 1997 went into full effect, a cut widely considered a political move made in advance of the 1998 election. Together, the increased school funding and decreased revenue are blamed for what became a more than $1 billion structural budget deficit.

State budget officials say Maryland was able to weather the recession and reduce the deficit during Gov. Martin O'Malley's administrations in large part by raising the sales tax, income taxes and the corporate tax rate, while cutting some state spending.

Now that the economy has improved, many of those new taxes and fees have become targets, spawning what political observers say is an unusual campaign to support taxes.

"Advocates will always defend whatever they're getting out of the budget, but I don't recall a time when people were defending taxes," said Donald F. Norris, chairman of the department of public policy at the University of Maryland, Baltimore County.

Defending taxes "is part of the conversation right now," said Benjamin Orr, acting executive director at the Maryland Center on Economic Policy, a nonpartisan think tank. The group opposes cuts to government revenue streams on the grounds that they could ultimately hurt the state's ability to deliver services.

Orr's group and others hope to change the conversation to include: "What are we getting back for these taxes? What are the benefits that the state receives?"

Even advocates of taxes that do not appear to be targeted for repeal — so-called "sin taxes" on cigarettes and alcohol — have commissioned studies to prove the benefits of those revenues to public health.

"Our interest is in getting the health care taxes off the table in any discussion," said Vincent DeMarco, president of Maryland Health Care for All.

The stormwater fee and the corporate income tax rate are the two levies considered most likely to be targeted for change.

Environmental advocates say opposition to the stormwater fee has become so intense that lawmakers who voted for it have asked for help explaining its benefits to constituents.

"We have legislators calling, saying, 'I'm worried about this,'" said Brent Bolin, director of the Choose Clean Water Maryland program at the state's League of Conservation Voters.

Del. Maggie L. McIntosh, who chairs the Environmental Matters Committee, recently told a crowd of environmentalists that "whether you call it the stormwater fee or the rain tax, the issue is going to be front and center during the next session."

McIntosh, a Baltimore Democrat, added, "We must play defense. We must form a team united like no other."

Leaders in Maryland's business community plan to release their legislative goals in December, and many expect them to include a call for tax relief — particularly a cut in the corporate income tax rate.

More than a year ago, the Maryland Chamber of Commerce formed a Competitiveness Coalition of more than 50 business groups in the hope that the group could pitch a comprehensive plan to a new governor, said Mathew J. Palmer, the organization's vice president of governmental affairs.

Already, Busch and Senate President Thomas V. Mike Miller have made comments suggesting support for tax policy changes to improve the state's business climate.

"The business of the state needs to be about business," said Miller, a Prince George's County Democrat who has floated the idea of cutting the corporate income tax rate. He has also suggested that "there needs to be an adjustment" to inheritance taxes.

Busch formed a team of lawmakers to investigate what could be done to help the business community, and potential solutions include cutting taxes or offering tax breaks.

"The whole premise is to enhance jobs," the Anne Arundel Democrat said. "Whether it's a tax credit or a tax relief, it would be something that would help businesses."

Legislative analysts say reducing the income tax rate by a single percentage point would require $160 million worth of cuts unless the state came up with another revenue source.

Any push to cut taxes would come over the objections of the governor, who cannot run for re-election in 2014 because of term limits and is entering his final legislative session. O'Malley said he doesn't think Maryland can afford tax cuts.

"There's always a certain temptation and allure, a certain attraction to cutting taxes to make everybody feel good and make everybody look good," the governor said. "But in the long run, the math catches up to you."

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