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October 30, 2007
Tricks for taxpayers; treats for the politicians
(Graphic courtesy of Pillage Idiot)
| Years | revenues | change | spending | change |
| 1998 | $15,917,000,000.00 | $15,444,161,032.00 | ||
| 1999 | $17,043,000,000.00 | 7.07% | $16,632,654,449.00 | 7.70% |
| 2000 | $18,000,000,000.00 | 5.62% | $17,579,036,962.00 | 5.69% |
| 2001 | $19,995,000,000.00 | 11.08% | $19,559,963,913.00 | 11.27% |
| 2002 | $21,712,000,000.00 | 8.59% | $21,712,000,000.00 | 11.00% |
| 2003 | $22,473,000,000.00 | 3.50% | $22,473,000,000.00 | 3.50% |
| 2004 | $22,710,100,000.00 | 1.06% | $22,975,000,000.00 | 2.23% |
| 2005 | $23,604,822,077.00 | 2.74% | ||
| 2006 | $25,790,186,384.00 | 9.26% | ||
| 2007 | $29,009,003,118.00 | 12.48% | ||
| 2008 | $30,037,941,120.00 | 3.55% |
As you can see both revenues and budgets have been growing at healthy rates over the past decade.
Something else that's important to keep in mind is that the Maryland State Budget is some $30 billion. $1.7 billion might be called a "structural deficit," but it's also some 6% of the whole budget. If the governor or legislators say that cuts will result in catastrophic loss of services they're not being honest. 6% is not a huge relative amount.
The other problem that's not clear is what programs have been added or expanded over the past decade. But we haven't just seen a budgetary increase due to spending.
According to the Tax Foundation, Maryland's tax rate is the 15th highest in the nation.
So with all this in mind, let's look at what the cheerleaders for a tax increase in the current special session have in mind.
Mr O'Malley's Test (Washington Post, October 28, 2007)
Mindful of the political obstacles, Mr. O'Malley has adopted a strategy of extreme pragmatism. He has offered a plan -- higher taxes on sales, corporations, cigarettes and vehicle titling, plus a more progressive income tax and a property tax cut -- while signaling that he is willing to entertain almost any modification. The pragmatism is good; but the question is whether the governor is so eager, or desperate, for a deal that he is ready to throw sound policy to the wolves.
One of the things I haven't understood about the discussion of taxes is why we need an increase in the sales tax. As prices increase due to inflation, so should revenues from the sales tax. Additionally, Maryland has a sales tax on clothes that nearby states Pennsylvania and New Jersey don't. So perhaps if it's that important to raise the sales tax, maybe it shouldn't include clothes - especially since that hurts the poor.
An increase in the cigarette tax can hardly be considered a way to increase state revenues as making cigarettes more expensive is cited as a way to decrease smoking.
He has already done so by proposing a higher sales tax but declining to apply it to most consumer services. And, instead of suggesting a broad-based sales tax, the governor has blown with the political winds by pressing ahead on slot machine gambling. Not only are slots tantamount to a tax on the poor, as the governor acknowledges, they also tend to sap spending on other products and services, since household budgets are finite. Moreover, by pushing a referendum to break a long-standing legislative deadlock on slots, Mr. O'Malley is enabling lawmakers to evade their most important responsibility: to cast votes and make decisions on tough issues.
I'm an agnostic on slots. I have mixed feelings about them. But let's not say that they're a tax on the poor. Playing slots is optional; taxes are not. Part of the rational behind the slots is that more and more neighboring states have slots and Marylanders are traveling to those states to play them. And the they "sap spending on other products and services" is a poor argument coming from a paper that advocates public spending on a sports stadium that will benefit the private owner of the team.
In other respects, the O'Malley plan is more enlightened. By increasing corporate income taxes and closing loopholes, he would ensure that firms pay their fair shares. By cutting income taxes on the lowest earners and raising them on the highest ones, he would ditch the state's antiquated flat tax in favor of a much-needed progressive structure. (A competing proposal by Montgomery County Executive Isiah Leggett (D) serves the interests of his wealthiest constituents but is no improvement; it would spread the burden of a tax increase much more broadly on middle-class earners while easing the impact on the rich.)
Here's another canard that we keep hearing from the tax boosters: Maryland's income tax is antiquated and must be brought into the 21st century. As noted above, Maryland's tax burden is high. Progressivity isn't what's needed; reduction is.
Explaining his decision to press ahead with a special session, Mr. O'Malley said it would be "irresponsible not to try." In one important sense he is right: By waiting to address the deficit until the legislature's regular session next year, the state would dig itself $500 million deeper into the hole. Having inherited the deficit, Mr. O'Malley will now be judged on his performance in fixing it.
O'Malley inherited nothing. He could have chosen to increase spending by less. In Maryland the governor has a lot of power over spending. (Only the governor can initiate new spending; the legislature can eliminate spending only.)
To lament that failing to close the budget gap now will increase the problem by $500 million is disingenuous when the Governor is attempting to raise spending by that amount right now too with a health care bill.
Opportunity in Annapolis (Baltimore Sun, 10/29/2007)
In a democracy, debate and disagreement are healthy. But the conversation should not be derailed by those who falsely claim that Maryland can solve this problem without raising taxes. The spending cuts required by such an approach are far worse than any tax proposal we've heard. The governor's "doomsday budget" scenario may have been crafted for effect, but many of its choices (major reductions to land preservation, higher education and public health, to name a few) would likely come to pass.
Sorry, as I pointed out above, the deficit is about 6% of the total budget. There's no need for drastic cuts. Of course the "doomsday budget" is meant for effect, but it's a dishonest one. We're not talking about cutting 50% or 25% or even 10% of spending. A little belt tightening would do the trick. Saying that doing so is "far worse" than raising taxes is still misleading.
With the approval of the $1.3 billion Thornton plan to boost state aid to public schools five years ago - a much-needed reform, it should be noted, that has enjoyed broad public support - legislators and the last two governors helped dig the budgetary hole. Mr. O'Malley has assumed the difficult task of actually filling that void rather than setting up another stopgap bridge.
Well Thornton was a way for the legislature to avoid its responsibility. I've looked into education funding in the past. I'm not convinced that spending more will solve anything. But the Thornton commission said it would, so I must be wrong. Thornton enjoys broad public support because there are precious few naysayers about it. The independent press in the state has been all for it. But when Thornton funding levels fail to improve Baltimore City schools, what will be the next remedy? More spending?
Small wonder that a recent poll of Maryland registered voters suggests the governor has taken a hit in his job approval rating. But the same survey also showed that far more Marylanders think the state is going in the right direction than not, and even the tax increases found significant public support -a healthy majority, in some cases.
Actually there is not significant support for the sales tax increase. People oppose it by large margins.
Earlier the editorial was waxing philosophical about democracy and the role it will play in raising our taxes. The problem is that democracy functions best when the citizenry is informed. The two major newspapers in the state are fully behind tax increases so they have abdicated their responsibility in informing the citizenry. When citizens are told that the only way government can function is with a tax increase and aren't informed of other options, they'll usually say, "Hey, I don't like it, but if it's needed ..."
The point is that there are other options but the citizens of Maryland are not being properly informed.
In the next two weeks, lawmakers will need to follow the governor's lead and muster the political courage to put state finances in order. Extending health care to the uninsured, making income taxes fairer, addressing the threat of gridlock and closing certain loopholes in the tax code - all deserve to be part of that fix. Accomplish those and what voters will remember is not an extra dollar for a pack of cigarettes or 16 cents more to fill up a gas tank, but a legacy of real progress for the state.
Here the Sun is showing its true colors. If the problem was the deficit, it wouldn't be advocating more health care spending now. The point is that the Sun isn't promoting responsible governing but expanding government.
In fact both papers tell us that being responsible means spending more. That isn't always the case. Government (at all levels) has grown to a point where the average citizen cannot know about every single program that government supports and, therefore, can't properly judge what the government ought to keep doing and what it should stop doing.
The papers have failed to inform us properly. Their arguments for higher taxes are not at all convincing.
But if they really want more revenue, let me suggest that perhaps sales taxes on newspapers should be raised to 10% and sales taxes ought to be extended to newspaper advertising. If the papers don't mind taxing me more, well I certainly wouldn't mind seeing them pay more too. Perhaps they could even advocate for these taxes being such good citizens.
maryland, 
maryland politics, 
taxes.
