Tax talk catching ears of lobbyists

The Baltimore Sun

During a two-week blitz, Gov. Martin O'Malley used campaign-like events to explain how he would fill a projected $1.7 billion hole in the state budget next year.

Each day, the governor's message quickened the pace for lobbyists in Annapolis, especially the ones scrambling to get the tax target off their clients' backs.

"It is getting more intense for those who are getting hit," said lobbyist Laurence Levitan, a former chairman of the Senate Budget and Taxation Committee. "The governor had a message broadcast in his proposals. And if you're on that list, it's getting intense. The auto dealers are pushing hard. Businesses are pushing hard."

State legislators are grappling with the onslaught.

"There's quite a bit of lobbying going on," said Del. John A. Olszewski Jr., a Baltimore County Democrat who is a member of the Ways and Means Committee. "The inbox is as full as during [the General Assembly] session. They want to get their stories out before the decisions are made."

With O'Malley eyeing a November special session, some lobbyists even have buttonholed the governor's staff and legislators to make sure their clients aren't added to the tax mix.

Carolyn Bonnett, president of the lobbying firm CTB Government Relations, contacted the governor's office on behalf of AAA Mid-Atlantic to keep the sales tax from being extended to roadside services and auto repairs.

"Sometimes if you are under the radar screen, you hate to bring it up," Bonnett said. However, she added, "If you do business right, it's far better to educate legislators and public officials on the front end."

Seeking to erase the budget deficit and increase spending in some areas, O'Malley wants to raise the sales tax rate from 5 percent to 6 percent and broaden that levy to cover more services. He would cut the property tax by 3 cents per $100 in assessed value, double the cigarette tax to $2 a pack and increase the car titling tax.

He has also proposed overhauling the income tax structure to charge lower- and middle-income Marylanders less but top earners much more, raising the corporate income tax rate from 7 percent to 8 percent, tying gas tax increases to the cost of construction materials, and plugging corporate tax loopholes.

O'Malley's strategy of releasing information about his budget plans in phases has led to a need for details, which is music to the ears of lobbyists who trade on access, information and influence.

"The governor is stepping up and making brave proposals, but he is doing that in the typical trial-balloon fashion," said Roy T. Meyers, a political science professor and government budgeting expert at the University of Maryland, Baltimore County. "He can hear from the state's active participants, and if it's negative in some ways, he can back down from his proposals in his negotiations with legislators."

When asked how lobbyists will affect the result, Stephen J. Kearney, the governor's communications director, said: "We know there will be pieces of our solution that some groups don't like - and they'll hire lobbyists. But taken as a whole, it's a fair plan that keeps Maryland competitive and moves our state forward."

In addition to raising the sales tax rate, O'Malley wants to apply the tax to services including health clubs, tanning parlors, massages and real estate property management.

As a result, lobbyist Michael Gisriel said, most of his attention is focused on helping two clients - the Mid-Atlantic Club Management Association and the Maryland Multi-Family Housing Association.

A former state delegate who is now a lobbyist for Baltimore County, Gisriel said he considers the governor's sales-tax proposal to be the "opening salvo in an ongoing battle."

As evidence, he cites the O'Malley administration's decision to dust off a 2004 bill that the House of Delegates had approved that extended the sales tax to cover some services. (The bill died in the Senate.)

"I can see [a tax on] tanning and tattooing but not health club membership fees," Gisriel said. "It undercuts the whole message about a healthy lifestyle. We should be encouraging health club memberships."

Lobbyist Bruce Bereano, whose clients include the Maryland Association of Self-Storage Facilities, challenged the rationale behind O'Malley's proposals, including adding property management to the sales tax base.

"You are taxing real estate," Bereano said. "You are putting a tax on rent. It's no different than putting a tax on renting an apartment."

The Maryland Automobile Dealers Association is fighting the governor's proposal to increase the vehicle titling tax by one percentage point to raise more money for the Transportation Trust Fund, a move that would add an extra $200 to the cost of a $20,000 car. The group has offered a compromise: charging the tax on the difference between the price of a new car and the value of a trade-in.

That would generate about $70 million a year, compared with the $166 million projected under O'Malley's plan.

The potential compromise has been about six years in the making, said Travis Martz, a lobbyist for the Maryland Automobile Dealers Association.

"We have not had our head in the sand. We knew there would probably be a tax increase in the future," he said.

Progressive Maryland, a liberal coalition of groups, said it has made "slow but steady progress" over the past six years toward persuading legislators to embrace "combined reporting" - which would prevent large companies doing business in Maryland from hiding profits in other states.

But the projected budget deficit and O'Malley's embrace of "combined reporting" have speeded up progress, said Sean Dobson, a lobbyist with Progressive Maryland.

"Corporate tax law seems so complicated that people's eyes glaze over," said Dobson. "Then they realize that the issue is very simple - multi-state corporations stashing profits in multiple fake subsidiaries ... should stop. The final step is, the lawmakers have to surmount the incredible opposition to this by the Maryland Chamber of Commerce and other corporate special interest groups, who have a lot of lobbyists and give a lot of campaign contributions."

Lobbyists representing business groups say they also are trying to track how the latest effort to legalize slot machines in Maryland will play out.

That could determine the timing and outcome of a budget package, they say. One lobbyist compared it to "playing three-dimensional chess" - lobbying legislators and the governor's office while trying to figure out whether O'Malley, Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch can cut a deal on slots.

O'Malley has said he plans to model his proposal on a 2005 House bill that would have allowed 9,500 slot machines at locations near major highways in Allegany, Anne Arundel (home to Laurel Park racecourse), Frederick and Harford counties.

W. Minor Carter, a lobbyist for the group Stop Slots Maryland Now, said the issue is "very much in flux for both sides" because O'Malley has not offered details. But Carter said his strategy remains to attacks slots as bad public policy.

"We intend to do it consistently while the proponents of slots have to hold their fire, even to the extent of saying slots are fine because they may be encouraging sites that are not compatible with their goals," Carter said.

Levitan, the lobbyist who served as a member of the General Assembly from 1971 to 1994, said legislators should resolve the budget shortfall in a special session in November and not wait until the regular session next year. "You have to move fast," he said. "Some people complain that they won't be able to air their views. There is not an industry or a group that has not been on the record at this point complaining about one thing or another."

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