O’Malley call to special session gets mixed review Wednesday, Oct. 17, 2007 By Alan Brody
Staff Writer
O’Malley’s budget proposal * Revamp income tax brackets and increase tax on high-income filers. Raise $163 million a year.
* Increase the sales tax from 5 cents on the dollar to 6 cents. Raise $730 million a year.
* Establish two permanent sales tax holidays. Cost of $13 million.
*
Tax four services not taxed now: tanning salons, health clubs, massage services and real estate management services. Raise $74 million a year. * Cut the state property tax from 11.2 cents per $100 of assessed value to 8.2 cents. Cost of $54 million a year.
* Raise the corporate income tax from 7 percent to 8 percent. Raise $110 million a year, to be split between higher education and transportation.
* Eliminate ‘‘loophole” that lets corporations shield profits from state tax by moving money out of state, or to unprofitable subsidiaries. Raise $20 million a year.
* Eliminate ‘‘loophole” that lets corporations sell property by avoiding state and local transfer taxes. Raise $16 million a year.
* Increase the vehicle titling tax from 5 percent to 6 percent. Raise $166 million a year.
* Peg the 23.5-cent gasoline tax to the cost of construction, projected at about 0.7 percent a year unless the index falls. Raise $63 million a year for roads, bridges and transit.
* Increase the earned income tax credit, returning $33 million a year to low-income families.
* Legalize slot machine gambling: $27 million in licensing fees next year, $250 million the following year with a half-year of operation and $550 million the year after that with a full year of operation, with $125 million for school construction and $425 million for Thornton.
* Double the cigarette tax to $2 per pack: Raise $170 million a year for health care expansion and deficit reduction.
* Dedicate the rental car tax to the Transportation Trust Fund: $40 million a year.
* Double the senior income tax exemption to $2,000 for people with incomes of less than $30,000 a year. Cost of $10 million a year. * Give a $50 sales tax refund to households that earn up to $30,000 a year. Cost of $20 million a year.
ANNAPOLIS — Gov. Martin O’Malley on Monday formally called a potentially risky special session of the General Assembly to take up his proposal to solve Maryland’s projected $1.7 billion budget deficit.
State lawmakers will reconvene in Annapolis on Oct. 29 to begin deliberating O’Malley’s multipronged plan that includes a slew of tax hikes and legalized gambling.
‘‘The time for delay has passed and ... I am optimistic about what the leaders of our state can accomplish when they know that so much is at stake,” the governor said at Monday afternoon’s State House news conference.
O’Malley (D) has warned that the budget gap for fiscal 2009, which begins July 1, will swell to more than $2 billion if the General Assembly waits to address the deficit until its regular session starts in January. Acting in a special session will allow the state to start collecting new revenues on Jan. 1, six months earlier than if action were deferred until the 90-day session.
But in ordering the special session before securing enough legislative commitments to pass his plan, O’Malley is risking defeat in his most closely watched test since taking office in January.
Former Republican Gov. Robert L. Ehrlich Jr. twice called special sessions during his four-year tenure, but vetoed the products that emerged, only to see the Democratic-controlled legislature override him both times.
Democratic leaders in Annapolis want O’Malley to succeed, but some are uncomfortable with parts of his plan and Republicans have pledged to resist tax increase.s Lawmakers from both parties have expressed concern that the complicated plan wouldn’t receive a full public vetting during a brief special session.
O’Malley said he hopes the legislature can complete its work by Thanksgiving, but said there’s no firm deadline. ‘‘We do not want this to be a slapdash process.”
Senate President Thomas V. Mike Miller Jr. has a more ambitious timeline. ‘‘If we can’t get it done in two weeks, it’s ripe for failure.”
A special session cannot exceed 30 days, according to the state Constitution.
Miller told reporters that he advised O’Malley on Sunday night to wait on calling a special session until he secured the votes necessary to pass his plan in each chamber. But Miller (D-Calvert, Prince George’s) also said tackling the deficit now is ‘‘the only responsible thing to do.”
‘‘This is a crisis situation,” he added. ‘‘Everyone has got to pull an oar ... to make this plan go forward.”
O’Malley has spent much of the past month outlining his budget solution to constituents and courting lawmakers, but legislative leaders say slots remain the biggest stumbling block, especially without support from Republicans, who have previously backed legalized gambling. The 14-member Senate GOP caucus has said it would not support slots in a special session, which they view as an effort to impose higher taxes on Marylanders.
‘‘The Republicans need to stand for something,” Miller said. ‘‘They can’t just walk off the battlefield.”
The GOP, he said, should grant O’Malley the same courtesy Miller gave to Ehrlich in his first three years as governor when he championed slots. The governor is modeling his slots plan on a bill passed by the House in 2005 that would have placed 9,500 machines at four locations in Allegany, Anne Arundel, Frederick and Harford counties.
Republicans stand for slowing the rate of spending, rather than taking more from taxpayers, Senate Minority Leader David R. Brinkley responded. And since slots revenue won’t be realized for several years under O’Malley’s plan, there’s no need for a rushed special session.
‘‘He’s gone through the budget surplus we had, and now they’re looking for a quick fix just to get more revenue into the checkbook,” said Brinkley (R-Frederick, Carroll)
House Minority Leader Anthony J. O’Donnell (R-Calvert, St. Mary’s) disputed Miller’s claim that Republicans aren’t participating in the process.
‘‘We have not walked off the battlefield, but what we won’t acquiesce is the raiding of Marylanders’ pocketbooks in the absence of leadership from the Democrats,” he said.
O’Malley maintained that the state must address its long-term fiscal woes now or risk leaving future generations in more dire straits.
‘‘If we are to go back to that ‘simply live for today’ sort of outlook, the alternatives are pretty damaging to the quality of life that all of us cherish as Marylanders,” O’Malley said. ‘‘And I don’t think that that’s the future that any of us would prefer.”
To help close the deficit and pay for $400 million in transportation projects, O’Malley wants to revamp the state’s income tax brackets so the wealthy pay more and middle-class households get a break; reduce the state property tax rate by three cents over three years; constrain education spending; and boost sales, gasoline, tobacco, corporate and vehicle titling taxes, among other measures.
Many House members, including Speaker Michael E. Busch (D-Anne Arundel), who was out of town Monday and could not be reached for comment, preferred to wait until the regular session begins in January to tackle the deficit. The O’Malley administration claims that waiting would worsen the deficit by up to $600 million.
Calling a special session without a consensus is a gamble for O’Malley, said House Majority Leader Kumar P. Barve, adding that the governor is well short of the 71 votes he needs to pass a slots plan in the House.
‘‘He has a tough row to hoe,” said Barve (D-Montgomery), noting that the governor may also find resistance on other parts of his proposal. ‘‘... More likely he’ll come up with a proposal where everyone who feels their ox is getting gored is going to push back,” Barve said.
That discontent spans party lines, O’Donnell said. ‘‘You may find that Democrats don’t like this any more than Republicans do. It’s a bad plan.”
Some of those lawmakers are already readying their own tax proposals. Del. Luiz R.S. Simmons (D-Montgomery) wants to repeal a 10 percent state income tax cut passed in 1997, which reduced the tax rate from 5 percent to 4.75 percent and doubled the personal exemption to $2,400. Budget analysts have said it would generate $588 million and cost about $250 per return.
Part of O’Malley’s plan would revamp the income tax code to make the wealthy pay significantly more than middle-class households. It would raise $161 million
Simmons, who has been one of O’Malley’s sharpest Democratic critics, opposes a special session and challenges the administration’s claim that most people will benefit from the tax plan, due in part to a 3 percent reduction in the state property tax rate.
‘‘I don’t think it’s the modest matter the O’Malley people have been explaining it to be,” he said. Miller also predicted that Marylanders would be skeptical about the assertion that four out of five citizens would pay less.
Attempting to raise revenue in a special session without looking concurrently at the governor’s fiscal 2009 budget is ill-advised, Simmons said. ‘‘What the governor is doing is standing the process on its head.”
O’Malley reaffirmed a willingness to putting slots on the ballot next year for voters to decide if the legislature is unable to break its years-long stalemate on the issue. Barve said that idea may gain traction among lawmakers, but Miller said only that he would reevaluate his opposition to a referendum in the event of an impasse. ‘‘I don’t believe in government by plebiscite,” he said.
The governor said his plan is not etched in stone and can be altered to assuage wary lawmakers. ‘‘This is a forward-looking plan,” he said. ‘‘It is broad enough and it is flexible enough for the men and women of the General Assembly to arrive back at consensus.”
Staff Writers Sean R. Sedam and Douglas Tallman contributed to this report. E-mail Alan Brody at
abrody@somdnews.com.