Maryland Tax Wrap; Montgomery Democrats Split

Posted on April 7, 2008

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The question of how to raise enough money to pay for government services in Maryland has preoccupied the General Assembly for more than a year.

The structural deficit had been an open secret in Annapolis for years, and there were loud calls for Gov. Martin O’Malley to push the issue last year, during the winter 2007 regular session. O’Malley chose a more deliberative and focused course, and called a Special Session for November. The idea was for lawmakers to give full attention to one important subject — taxes –for two or three weeks, and resolve the matter. It nearly worked.

The tax package produced by the Special Session was generally flawed in that it was regressive — it weighed too heavily on the poor and the middle class. Still, it might have been good enough, if the economy had continued to hum, with jobs and a sense of security for all.

But the Special Session had barely adjourned when the bubble began to burst. By January, it was clear that housing values were falling, the credit market was a train wreck, and the American economy was headed into a recession.

For Maryland, that meant that the recently crafted solution to the structural deficit was already inadequate. One particular flaw in the Special Session tax package was increasingly troubling. An extension of the sales tax to include computer services was the flaw that kept the tax issue alive through the 2008 regular session. As Senate President Mike Miller said, it seemed like a good idea at the time. But in light of the recession, a tax that might stunt the growth of the technology sector became widely seen as a mistake.

The House of Delegates put the issue to rest on Saturday, repealing what had become known as the “tech tax” by a 93-44 vote. The lost revenue — about $200 million a year — was partly offset by a three-year surcharge on a tiny group of the very wealthy, those earning over $1 million in a single year. But the “Millionaires’ tax” became nearly as toxic as the tech tax had been, at least in Montgomery County.

The House of Delegates vote split the Montgomery County delegation wide open. Of the 24 Montgomery delegates, 14 supported the tax solution, and 10 opposed it, The Washington Post reported. Those who voted against the tax bill were motivated by opposition to the Millionaires’ tax, it would appear.

Which leaves us with the question: How does a tiny minority, the very wealthy, hold so much power with delegates, in a county where the vast majority — the overwhelming majority — are regular folks living paycheck to paycheck? How does the tail wag the dog? — Bernie Hayden

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Posted in: Maryland, News, Politics, Taxes