ANNAPOLIS – Maryland Governor Martin O’Malley this week officially rolled out his comprehensive plan for addressing the state’s projected $1.5 billion structural deficit with a complex combination of tax increases and new revenue sources, including slots, but it remains to be seen if a compromise can be reached between both sides of the aisle.
O’Malley rolled out a different facet of his deficit-reduction plan each day for five straight days, starting with an elaborate income tax reform package and culminating with his complex plan to authorize as many as 9,500 slot machines at undisclosed locations around the state. In between, the governor pitched his plan for increasing the sales tax in Maryland by 20 percent, cutting state property taxes by 3 percent and closing corporate tax loopholes that allow large businesses in Maryland to skirt around state transfer and recordation taxes to the tune of millions of dollars.
State lawmakers watched closely as O’Malley launched his budget initiatives and most are withholding judgment until they get a chance to review all of the nuances, but it is clear the divide between Democrats and Republicans, at least locally, has not narrowed with the attempt at compromise. It would be unfair to characterize the governor’s plan as an effort to increase taxes to continue on the same course, considering he did make $280 million in budget cuts this summer by attacking inefficiency in state government, but his proposed tax increase plan does appear to be an effort to throw more money at the growing gap between spending and revenue.
According to State Senator Lowell Stoltzfus (R-38), the structural deficit merely represents the increase in spending from last year to this year, and by simply freezing spending at the same rate, the deficit could be eliminated.
“We continue to grow government at an alarming rate,” he said. “This deficit is just the growth over last year’s spending. If we level-funded what we did last year, we wouldn’t be facing the enormous deficit.”
While stopping short of blaming the O’Malley administration for runaway spending, the shore senator did say the gap should have been addressed sooner rather than later.
“I’m very frustrated we didn’t begin addressing this last year,” he said. “It would have been far less of a mountain to climb. I had a budget amendment that would have seen this through without any tax increases.”
At any rate, tough choices will have to be made to reconcile the deficit and the decisions will likely be based largely on simple political philosophy. Stoltzfus said the governor and the democratic-majority state legislature favor increasing taxes in order to maintain the same level of spending for state programs.
“The democrats are determined to raise all sorts of taxes,” he said. “It’s irrational, but I guess it’s a philosophical difference. Democrats like to think of government as this friendly, benevolent thing, but a lot of people who work hard and pay taxes don’t see it that way.”
However, many Democrats believe the state has an obligation to maintain the level of spending for programs and critical projects to ensure the quality of life in the state is maintained. For example, local Delegate James Mathias (D-38B) said this week without a comprehensive tax reform package, it will be difficult to maintain the programs so many rely on.
“I’m not certain if we can find $1.5 billion in sustainable reductions in our government,” he said. “We’re charged with at least maintaining the quality of life for our citizens.”
To illustrate his point, Mathias noted several projects and programs of local importance that could be hurt or set back for years without a comprehensive plan to address the deficit.
“We know the conditions of our roads. We know all about Route 113 and Route 589, and we know about all of these other needs,” he said. “Under the current tax structure, the money is not there for these things. We’re expected to bring home the money –money for Pocomoke High School, money for beach replenishment, the highways – these are all critical needs and the money just isn’t there.”
Mathias said he is carefully reviewing the governor’s plan unveiled this week and will base his decisions on what he believes is best for his constituents. He acknowledged the decisions could hurt some people in the district while others will benefit from them.
“I know I’ll have to make tough choices – this is where the rubber meets the road,” he said. “I hope I’ve earned the district’s confidence and trust and when I sort through the facts, I’m going to make rational, informed decisions. Some people will agree and others will disagree.”
While reserving judgment on all of O’Malley’s initiatives rolled out this week, Stoltzfus did have strong comments about the proposed increase in the sales tax. The governor couched the hike as a one-cent increase from five cents on the dollar to six cents on the dollar, but the reality is, it represents a 20-percent increase.
“The 20-percent increase in the sales tax is going to be ludicrous on the Eastern Shore,” he said. “It’s going to be very damaging being next to Delaware. The merchants in Ocean City are going to get clobbered by this.”