Governor, Legislative Leaders Say No, But Others Could Propose Tax Increases

Governor Martin O’Malley has said his proposed FY 2012 budget will not contain tax increases, and Senate President Mike Miller and House Speaker Mike Busch have pledged no new taxes next year, but that doesn’t mean others have.  As reported by the Baltimore Sun, many advocates and officials have identified some possibilities for new tax revenue.   These new sources include a ten-cent increase in the alcoholic beverages tax, an increase in the gas tax, an extension of the sales tax to services that are currently not taxed, instituting combined reporting, increasing the State property tax rate, and shifting teacher pension costs to the counties which could result in increases in local property taxes.

Alcohol

Raising the tax by 10 cents per drink would generate $214 million in new annual revenue, the coalition says, and cut health care costs by $250 million by reducing drinking.

Transportation

One source of revenue for the trust fund is Maryland’s 23.5-cents-per-gallon tax on gasoline. Twenty-seven states, including neighboring Pennsylvania and West Virginia, have higher rates. Gas taxes in Delaware and Virginia are lower; the rate in Washington is the same.

Services

Fiscal analysts projected that it would have generated about $725 million in new revenue by its third year.

Combined reporting

Technically a change in accounting rules, combined reporting would shift the way tax collectors view business income from regional or national companies. Larger firms can now shelter some of their profits by transferring money earned in Maryland to states with lower taxes.

Fiscal analysts determined that the change could have netted $109 million to $170 million annually, though their work is based on pre-recession corporate profits.

Property

The state’s property tax rate, set at 11.2 cents per $100 of assessed value, hasn’t changed since Ehrlich was governor. It’s a fund he used to pay the interest on state borrowing, and those payments will go up in coming years. Warren Deschenaux, the legislature’s top fiscal analyst, said that rate will generate enough money to cover payments next year but it gets “harder” after that.

Education pension fix

Some say it is fundamentally unfair for the state to pick up the entire tab, which comes to $900 million this year, when it is local school boards that make decisions on teacher hiring, salaries and benefits.

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