As Gov. Martin O?Malley and Democratic leaders consider taxes to raise to help fix a likely budget deficit next year, the process has stirred up a squabble over the wisdom of a 10 percent income tax cut passed 10 years ago.
Republican senators last week challenged the assertion by the governor and other Democrats that the tax cuts in 1997 and ?98 were part of the reason for the deficit.
“The real culprit … is years of excessive spending, ” said Senate Minority Leader David Brinkley, R-Frederick-Carroll.
State income tax collections increased 53 percent from fiscal 1999 to this year; the state budget went up 75 percent in that period. Income tax revenue makes up a quarter of the budget as the largest source of funds.
Senate Republican whip Allan Kittleman, R-Howard-Carroll, said the cuts in 1997 and ?98 “also contained safety valves to protect lower-income citizens” by doubling the personal exemption to $2,400 and increasing the earned income credit, both reducing tax liabilities for low-wage earners.
Ironically, Democratic legislative leaders led the charge for tax cuts both years.
If the state was running a surplus, it should be given back to the people, said Senate President Thomas Mike Miller, D-Calvert, who voted forit.
Based on the past year?s census figures, Maryland is third highest in the nation in per capita state income taxes and third highest in those taxes as a percentage of personal income.
Five years later, the legislature passed a massive aid increase to local schools, said former Sen. Barbara Hoffman, lead sponsor of the 1998 bill.
The legislature never passed a funding mechanism for the $1.4 billion jump in school aid. Not coincidentally, that?s almost exactly the size of the projected deficit next year.
The biggest political mistake, Hoffman said, was the income tax cut was so small and gradual for the public to notice, even though it came to more than $1 billion in its first five years.
