The Maryland Senate approved last night a referendum on slot machine gambling, moving the legislature one step closer to asking voters in November 2008 whether to allow up to 15,000 of the devices across the state.
Senators worked late into the night on a $1.4 billion package of tax increases, and a final vote on the tax plan was expected today.
The Senate's 31-15 vote to approve a referendum on Gov. Martin O'Malley's slots proposal came hours after backers fended off efforts to change the planned locations of slot parlors and to have an up-or-down vote on allowing them.
Final passage requires a three-fifths' majority in each chamber, and House Speaker Michael E. Busch has said he backs a referendum on the contentious issue.
Senate President Thomas V. Mike Miller said the passage of slots will generate millions for education, transportation and environmental protection without forcing Marylanders to pay higher taxes.
"Hopefully, it will be approved next November, and we can move on," said Miller, a Southern Maryland Democrat who has been the legislature's strongest slots backer. "We should have had this done years ago."
Despite a daylong debate, the Senate rejected most attempts to alter its version of O'Malley's plan to close a projected $1.7 billion budget shortfall next year.
In the House, delegates planned to begin taking formal committee votes on the tax legislation today, but preliminary meetings held yesterday suggested that they might try to restore some of the measures that senators stripped out of O'Malley's income tax proposal and establish a mechanism that proponents say would prevent large corporations from hiding their profits out of state.
"The House is looking to be more sensitive to the working men and women of the state of Maryland," said Busch, an Anne Arundel County Democrat. "We want to make sure everyone is treated equitably in this, including the corporate community, who, we believe, should pay their fair share."
Although differences are likely to emerge on taxes, the two chambers appear closer on slot machine gambling than ever before. O'Malley's slots referendum package was crafted specifically to be more palatable to the House, where there is significant opposition to legalizing slot machine gambling.
Voters would be asked next year whether to approve a constitutional amendment allowing slots at five locations - one each in Allegany, Anne Arundel, Cecil and Worcester counties and Baltimore City. The plan could put slots at Laurel Park and Ocean Downs racetracks, but not at Pimlico in Baltimore. Slots could raise as much as $700 million a year for the state, officials estimate.
Several Republicans objected to using the state constitution as a vehicle for the slots debate, arguing that the General Assembly has the authority to legalize slots gambling and that the referendum is a political tool.
"It's a sacred document, not a weather vane," said Sen. David R. Brinkley, the minority leader from Frederick County. "You don't need to go in and tinker with the constitution."
Some legislators said they were concerned that opposition in the jurisdictions where slots would be allowed could be drowned out in a statewide vote, while others predicted slot machine revenue would decrease as neighboring states approve casinos or slot parlors to compete.
Earlier yesterday, Republicans failed to amend the bill to take out the Worcester County location at Ocean Downs and instead include Rosecroft Raceway in Prince George's County. Sen. J. Lowell Stoltzfus, an Eastern Shore Republican, said that many officials in Worcester County oppose slots, and that the gambling facility would draw tourists away from Ocean City. "That glitz is going to pull a lot of people," he said, "and existing businesses [will] die."
Senate Majority Leader Edward J. Kasemeyer, a Howard County Democrat, said the sites in the bill were chosen to maximize the amount of revenue to be raised.
As for the tax bill, the Senate narrowly approved an amendment that defines a Maryland resident as someone who lives in the state for more than three months - a change from current law that says six months.
Sen. Brian E. Frosh, a Montgomery County Democrat, said the provision would ensure that people who live in Maryland part time, using state services, pay state income taxes. Many of them, he said, intentionally live most of the year in another state with a low or no income tax, such as Texas or Florida.
Several lawmakers on both sides of the aisle said the provision would harm retirees and seasonal workers, and discourage people from keeping ties to Maryland. "You might as well put a sign up saying, 'Move to Delaware,'" said Sen. Nancy Jacobs, a Harford County Republican.
Republicans also tried dozens of attempts to change the tax proposals without success. Some, such as an attempt to eliminate any "marriage penalty" from the new income tax rates, were relatively close votes. Others, such as a proposal to exempt the Eastern Shore from an increase in the sales tax, were not.
However, a number of changes are in store once the bills are sent to the House.
A Senate committee voted this week to extend the sales tax to computer services, landscaping and arcades - services not included in O'Malley's proposal.
The last-minute addition of those services by the Senate panel created a friction point in Annapolis, because critics say members of those industries had no chance to voice their opinions in a formal hearing.
Yesterday afternoon, landscapers' trucks briefly circled the State House in an impromptu protest before they were chased off by state police. Last night, the Senate removed landscaping services from the tax bill.
The idea of taxing computer services has also come in for criticism from legislators who said they believe that it would be difficult for the state to determine what activities would be subject to such a levy.
However, no consensus appears to have emerged in the House about which services should be substituted for the ones in the Senate bill. Senators scrapped O'Malley's proposals to extend it to real estate management, health club memberships and other services.
The Senate also tweaked the tax bill to raise more revenue than envisioned in O'Malley's original proposal, by capping the sales tax collection fee for larger retailers and delaying sales tax-free holidays. They also included language ensuring that lawyers are current with their taxes to practice in the state.
House leaders appear determined to revive a proposal in O'Malley's bill known as "combined reporting." The proposal is designed to force corporations to account for the profits they make in each state, which proponents say would keep them from avoiding Maryland corporate income taxes. The governor pitched it as a means to make sure corporations pay their fair share, and that idea seemed to resonate with delegates yesterday.
THE SLOTS BILL
WHAT HAPPENED: The Senate approved a slots referendum that would aloow voters to decide in November 2008 on a plan to put 15,000 slot machines at five sites.
WHAT IT MEANS: While the slots bill was approved and the tax measures were moving toward passage in the Senate last night, changes are likely in the House of Delegates. The two chambers would need to work out differences before the bills can be enacted.
WHAT'S NEXT: House committees will take up the Senate's version of the tax proposals today, and expect to begin debate on the slots proposal Monday. The House plans a Saturday session.