Maryland Gov. Martin O’Malley says taxpayers must “bite the bullet” to fix the state’s $1.5 billion “structural deficit.” He also calls for debate on the issue to be characterized by “candor, openness and honesty.”
He — and the General Assembly — should start by being more honest with Maryland taxpayers about why state government has such a huge deficit.
In that spirit, let’s dispose of the governor’s assertion that the “pandering” 1997 income tax cut caused $1 billion of the current deficit by reducing state revenues. State revenues increased after the tax cut, but state spending went up much faster.
Who made those decisions? Politicians in Annapolis, many of whom now join O’Malley’s “let the taxpayers bite the bullet” chorus.
There are two ways to deal with a budget gap: cut spending or raise taxes. The first step is deciding which priorities are — or should be — at the top of the wish list. Politicians always prefer tax hikes over cuts in their favorite programs.
A December 2006 special report by the conservative Maryland Public Policy Institute concluded that personal income would have to increase more than 9 percent per year for the state to grow out of its “structural deficit,” and this is unlikely to happen. But look at revenue estimates for 2006 to 2011, and the choice becomes crystal clear.
As the MPPI report noted, “Ongoing general fund revenues are expected to grow 25 percent … while ongoing spending will grow 41 percent over the same period.” The governor and the General Assembly can solve the problem of looming annual deficits, which will gobble up a tenth of the general fund in just four short years, by balancing future spending increases with state revenue projections.
Last month, Warren Deschenaux, director of the state’s Office of Policy Analysis, told legislators how to do exactly that. And, with a single party calling the shots in Annapolis, scaling back spending to manageable levels should be a slam dunk.
But that’s not what O’Malley is urging his fellow Democrats to do. The governor promised to come up with a mere $200 million in cuts in next year’s budget by July 11 — leaving $1.3 billion more to go. Instead of leading the way by following Deschenaux’s advice, O’Malley continues to flirt with the idea of calling a special session. That can only mean one thing: higher taxes.
The biggest deficit in Maryland is the state’s political leadership, which for decades has spent tax dollars far faster than taxpayers have paid them. O’Malley should tell us what bullets he and the rest of the Annapolis politicians are going to bite.
