How is Md. going to pay for Kirwan? Not by cutting taxes

This week, the Senate Budget and Taxation Committee shot down two of Gov. Larry Hogan’s proposed retiree tax breaks. One would have provided greater exemptions on all retirement income, including IRAs and pensions, while the other would have provided relief specifically for military retirees. Collectively, they would have taken a pretty good chunk out of state tax collections — $27.5 million and $91.5 million, respectively, for a combined $119 million by Fiscal 2024 — at a time when tax revenues are already coming up short. On Thursday, the state Board of Revenue Estimates lowered its forecast for tax revenue by $269 million over the next two fiscal years.

Given the expectation that the economy is headed for a downturn sooner or later and the need for increased state spending on public education outlined by the Kirwan Commission, the committee’s decision was the prudent choice. But it’s not likely to garner a lot of public support — as saying “no” to politically popular choices, whether they are affordable or not, seldom does. Meanwhile, the budget committee’s work isn’t over yet. Governor Hogan has some other special interest tax cuts out there — including the brilliantly-named “Hometown Heroes Act of 2019” that gives retired firefighters, police officers and EMS personnel a $16.7 million tax break — that are likely going to be rejected or ignored as well for the very same reasons that the others got the ax.

Are retired police officers deserving of a tax break? They sure are. Active duty officers are probably deserving of pay raises, too. But this business of sorting out the meritorious Maryland worker from the less deserving is fraught. What about teachers who struggle to educate traumatized city children? What about social workers, or daycare providers or clergy or civil rights advocates? Or how about the single mom who heroically holds her family together, works two jobs and volunteers at school when she can? Isn’t it better to set tax policy based on broader standards like income or assets? And that’s not even talking about the real bottom line — deciding exactly how much government spending is necessary to begin with.

We mention this because it’s getting to be crunch time in Annapolis, and lawmakers — and Governor Hogan — need to decide what’s really important and what is not. As a recent Goucher poll indicated, Mr. Hogan is held in high esteem by Marylanders right now. That the governor doesn’t go around proposing tax increases but does like to toss around tax breaks probably hasn’t hurt him in that department. Contrast that to former Gov. Martin O’Malley who did raise certain taxes and fees, the vast majority of which remain in effect and have allowed the Hogan administration to balance its budgets while spending more on popular line items like schools and roads. Mr. Hogan loves to blast Mr. O’Malley’s choices, but you can bet he also loves cutting the ribbons on new projects, too.

Meanwhile, Democrats in Annapolis shoot down Mr. Hogan’s special interest tax breaks but are prepared to mandate more education spending for which they have not yet found an offsetting source of revenue. That makes their acts of fiscal responsibility as suspect as the governor’s. But at least there is broad public support for upgrading the quality of public education in this state. Polls have consistently shown that taxpayers are willing to pay more to state and local government for that specific purpose. Are they as thrilled by the prospect of dolling out tax cuts to affluent retirees or even to certain public employee groups? Probably not.

All of which demonstrates that the notion that Maryland has a fiscally prudent governor and a spendthrift legislature doesn’t quite dovetail with the far more complex reality where each side exhibits elements of both. The real question is what tax policies and what spending priorities best serve Maryland’s future? Lawmakers will have to decide in the next few weeks. Setting Maryland on a path toward better public schools needs to be a top priority, and everyone — the governor and the legislature both — need to start figuring out a responsible, fair way to pay for it.