A panel of Maryland state lawmakers on Thursday recommended that Gov. Martin O’Malley slash the state’s structural budget deficit in half, but to do so, they expect him to raise a bevy of taxes and consumer fees to fill a $1.1 billion gap for next fiscal year. O’Malley is weighing tax increases on millionaires and corporations, as well as a steeper gas tax that hasn’t been raised in several decades. Internet sales and cigars, among other consumer products, could also increase under the budget O’Malley will propose next month.
“You name it; we’re going to see it,” said Maryland House Minority Leader Anthony J. O’Donnell, R- Calvert/St. Mary’s. “They all come together. We can’t afford to raise taxes on the little person.”
The talk of higher taxes comes after lawmakers this year approved a $14.6 billion budget for the general fund that raises alcohol taxes and relies on a wide range of fee increases, as well as reducing employee pension benefits, to fill the massive gap.
With the price of health care and education skyrocketing, state officials are likely to turn to taxes in funding a budget that keeps growing despite economic turmoil.
“It could be taxes,” conceded Warren Deschenaux, the Maryland legislature’s chief budget analyst. “We have a billion-dollar gap. The governor has to find a billion dollars of something just to balance the sucker out.”
State Republicans say the governor should focus on reining in spending — particularly soaring pension costs — before turning to more tax revenue. Democrats counter that the state’s wealthiest residents should pay more to ensure funding for the state’s transportation and education systems.
A recent study by the National Governors Association and National Association of State Budget Officers, however, shows Maryland’s general-fund spending will spike 11.4 percent this fiscal year — the seventh-highest rate nationwide — amid a slowly rebounding economy that has forced most states to rein in their budgets.
And some, such as Comptroller Peter Franchot, have been skeptical of the state’s ability to raise taxes on Internet sales.
Regardless of the method, both Republicans and Democrats agreed that the structural deficit needed to be halved. With federal funding expected to continually decrease, Maryland — highly dependent on the federal work force to fill coffers — desperately needs to bring spending back in line with dwindling revenues.
