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Groups propose ideas on deficit

The Baltimore Sun

As Maryland leaders search for solutions to the state's $1.5 billion budget shortfall, liberals and conservatives, business groups and labor unions are all offering unsolicited plans for how to fix it -- and attempting to sell them to the public.

Liberal groups, which have formed the Alliance for Tax Fairness, have gotten the quickest start. With the help of like-minded state senators, they have sparked debate on closing corporate tax loopholes and making the income tax structure more progressive. So far, they seem to have the ear of Democratic Gov. Martin O'Malley, who has also mentioned the possibility of adding a penny to the state sales tax and legalizing slot machines.

But he'll soon be hearing from business groups such as the Maryland Chamber of Commerce, which are putting together ideas for how the state can raise revenue without hurting the economy. The Maryland Association of Realtors is running radio ads warning against tax increases that could make homeownership more expensive, and Republican lawmakers say they will soon unveil their own plans.

"What's important is for us to have the voters realize there is an alternative," said Republican Sen. David R. Brinkley, the minority leader from Frederick County.

O'Malley has cut spending -- enough to improve next year's budget picture by $213 million and subsequent budgets by about $100 million -- but revenue-raising discussions have gone on largely behind the scenes.

The governor floated some potential ideas for tax increases in a recent meeting with The Sun's editorial board.

He mentioned making the income tax more progressive and closing corporate loopholes, as the liberal groups advocate, but also legalizing slots, an idea backed by many Republicans and some business groups, as well as raising the state's sales tax from 5 cents to 6 cents, which some Democratic lawmakers support.

O'Malley has also signaled that he's receptive to raising the gasoline tax, but he has said he doesn't want to increase the state property tax rate, noting that homeowners are already being hit by rising tax assessments.

Previous Maryland governors often impaneled commissions to study the state's revenue structure and recommend solutions. The idea is to take the issue out of the political realm -- while also building a consensus for tax increases the governor will later propose.

It hasn't always worked that way, though. More than a decade ago, a commission headed by Montgomery County attorney R. Robert Linowes proposed a package of spending cuts and tax increases to boost state and local revenue by $800 million a year. Then-Gov. William Donald Schaefer championed the plan, but it fell flat in the General Assembly, handing him one of his biggest political defeats.

O'Malley said he considered convening a commission but decided that direct negotiations with legislators would be a more effective strategy.

"This is a representative government," he said. "We need to do our job as the people's representatives to overcome these obstacles."

But outside interest groups are making sure their voices are heard.

The Alliance for Tax Fairness released the results of a poll recently that members said demonstrated broad-based support from Marylanders for enacting tax increases sufficient to increase spending on education, health care and the environment, not just to fill the budget hole. They said the results prove Marylanders want to see higher taxes on the wealthy and corporations to pay for such programs.

"We're pleased that [O'Malley] agrees that Maryland's unfair individual income tax should be more graduated and that Maryland should close corporate tax loopholes," said Sean Dobson, director of Progressive Maryland, an alliance member. "But we're not kicking back, even though it's summer. The lobbyists for BGE, Comcast and other corporate special interests are pushing hard to maintain their privileged status, so we need to push even harder."

Poll, radio spots

The alliance also includes the Maryland League of Conservation Voters; Maryland State Teachers Association; Service Employees International Union; League of Women Voters; American Federation of State, County and Municipal Employees; 1000 Friends of Maryland; and Association of Nonprofit Organizations.

The alliance used savvy media tactics to get the public's attention. The group unveiled its poll results outside an Annapolis firehouse -- representing the kind of public service that could suffer if the budget is balanced by cuts alone, members said -- and included testimonials by a nursing assistant and a college student.

A group of Democratic lawmakers led by Sen. Paul G. Pinsky of Prince George's County is advancing many of the same ideas as the alliance, and one of the member groups, the League of Conservation Voters, plans to unveil its ideas to "green the state budget" this week. The group said its plan "includes detailed strategies to reduce spending and raise revenue to protect our environment."

But liberal groups aren't the only advocates using the mass media to get their views out. The Maryland Association of Realtors is running radio spots with spooky thunderstorm sounds in the background to warn voters that more taxes on homeowners could be on the way, unless they -- and the Realtors -- act.

"Homeowners are already paying more than their fair share of fees and taxes, and we're too important to the economy to be treated like an ATM," a woman says in the radio ad.

Bill Castelli, the Maryland Association of Realtors' vice president for governmental affairs, said that lawmakers considered at least seven tax proposals this year that would have made real estate more expensive, including the idea of expanding the sales tax to cover professional services. Castelli said he was pleased that the governor spoke against property tax increases and has not suggested any other tax hikes that affect real estate, but he added, "Until there is a specific package out there that's got specific provisions, it would not be in our interest to take our foot off the gas."

Several business groups are trying to put their stamp on the debate by commissioning a study by Ernst & Young of six tax proposals lawmakers have considered.

Kathleen T. Snyder, president of the Maryland Chamber of Commerce, said the groups want to know the effects on job creation and employee retention of raising the sales tax, broadening the sales tax to cover services, increasing the corporate income tax, implementing "combined reporting" to change how profits of multistate corporations are apportioned, increasing the personal income tax on high earners and establishing a gross receipts tax on business.

Snyder said the study -- commissioned by the state chamber, Greater Baltimore Committee, Maryland Association of CPAs, Greater Washington Board of Trade, Maryland Bankers Association and other groups -- will likely be completed around Labor Day.

"For taxes that will hurt job creation, we will say, 'No, no, no,'" she said.

'Absolute last resort'

Republican legislators, though badly outnumbered in Annapolis, are having their say, too. They pushed plans during the General Assembly session to eliminate the deficit through spending cuts and the legalization of slots.

However, their plans would have required the state to back away from its multiyear commitment to increasing K-12 education aid, known as the Thornton Plan, as well as cuts to popular O'Malley budget proposals for health care and public safety.

Del. Anthony J. O'Donnell, the minority leader from Southern Maryland, said Republican lawmakers are working on a new proposal and should be ready to unveil it in the next few weeks. He said that if the governor supported the right kind of slots program, it could help mitigate the state's problems without doing any damage. But he said many of O'Malley's other ideas would be harmful.

O'Malley promised local leaders recently that he would try to avoid cuts in state aid to counties and municipalities, but many Republicans think that local governments should pay a greater share of certain costs, such as retirement benefits for teachers.

Both House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller, who are Democrats, have said they think that local governments will have to be asked to absorb cuts as part of the budget solution.

"It's an exercise in our fiduciary responsibility to the citizens," Brinkley said. "That's exactly what we're moving forward with."



Though Gov. Martin O'Malley has opted against naming a panel to seek solutions for Maryland's budget crisis, he's getting no shortage of advice from all sides.

Liberal groups:

Conducted a poll they say demonstrates support for more spending, not cuts, in education, health care and the environment. They want to close corporate tax loopholes and increase income taxes on top earners.

Business groups:

Commissioned a study of the economic impact of proposals such as increases to the sales or income tax. They plan to fight tax increases they consider anti-business but might support others.


Aired radio ads in an effort to thwart tax increases that could make buying homes more expensive. They are concerned about expanding the sales tax to cover services.


Proposed cutting spending growth (including K-12 education) plus legalizing slot machines to avoid tax increases. That idea received no Democratic support this spring, but GOP leaders say they're crafting a new plan.

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