O’Malley Floats Sales Tax "Trial Balloon"
Governor's proposal should be on the table.
Gov. Martin O'Malley did something this week you don't often see in politics today. He offered an idea for consideration, apparently without discussing it first with key advisers, checking in with party insiders, consulting his pollster, or doing a focus group.
He said that if he had his "druthers" he might look at a sales tax increase to provide new funding for transportation and help close the state's general fund budget gap. While opponents were quick to blast away, I can think of a number of reasons why the governor was right to raise the issue.
First of all, it is not necessarily bad that a politician occasionally has a new thought and dares to utter it in public before all the usual vetting. Maybe a few more off-the-cuff ideas would work better than yet another rehash of the same-old-same-old we've seen too often in Annapolis. That same-old-same-old isn't really working too well these days. So, for that reason alone, let me be the first to say: Bravo, Governor.
Secondly, raising the sales tax may or may not be the right thing to do now, but it certainly is worth putting on the table because it's a lot better than some of the alternatives.
Let's think about how the legislature might actually fix both the massive hole in the Transportation Trust Fund (after two decades utter neglect during which the gas tax lost more than half its value to inflation with no effort to replenish it) — and fill the long-term structural gap between revenues and expenditures in the state's General Fund.
First and foremost, the state can cut spending in some areas, and that may be the best place to start to with the General Fund. But there is at least one big reason why this can never be the whole answer. On the transportation side, all we have done is cut, and cut, and cut, and then cut some more. Right now there is nothing left to cut in what we used to call a "transportation program" in Maryland. Any further cuts here would carry a devastating economic cost that far outweighs any savings. So we need to look at some new revenue sources this year no matter what, for this reason alone.
The question then becomes, which new revenues should be on the table? Clearly the gas tax should be, but that just addresses the transportation funding issue, not the General Fund. On the General Fund side of the ledger, legislators are very unlikely to look at spending cuts alone to reduce our long-term deficit. Political reality is likely to assert itself in the form of some new tax increases along with further cuts, to essentially split the difference.
Among the options we are likely to face this year, in the real world we live in, a sales tax increase is practically the least of our worries, and would do far less harm to our economy than many other ideas legislators have been casually tossing around. Far worse would be that old Maryland standby: Increase business taxes. That is the worst thing we can do right now, given the fragile state of our economy, and would only move more jobs and future tax revenues out of our state, making our long-term deficits that much more daunting. That one really should be off the table, but it never seems to be.
Bottom line, it’s always easy to criticize a tax increase. It's also easy to play "kick the can down the road" for yet another year, instead of actually solving anything. So go ahead and fire away at the governor's sales tax idea. Just one thing … Gotta better idea?
Morris Zwick
8:30 am on Sunday, January 15, 2012
"Gotta better idea?"
Yes: pare back spending in line with revenues to eliminate the structural deficit!
Why is the transportation fund in trouble? Not just because the value of the gas tax has reduced over time, but mostly because the fund has been raided to support the general fund. Now we are told that tolls must DOUBLE to avoid default on bonds in the coming years. So they are telling us that the toll increases are necessary to prevent default, not to actually increase transportation spending. And this is on capital infrastructure spending that was paid for a long time ago (the Bay Bridge, the Baltimore tunnels, the Key Bridge, and most annoyingly the Susquehanna River bridge).
Last year the alcohol sales tax was raised 50%. This year tolls doubled. Not to long ago the sales tax was raised. License fees have increased. All because the state created a structural deficit by creating new programs when the tax money was rolling in. Do you think that these taxes will roll back when (and if) the economy ever comes back? Nope, instead more programs will be found to spend money on.
The other day when he Governor floated this idea, he was at a construction site taking political credit for creating 2000 new affordable housing units around the state. Perhaps a worthy goal, but another example of spending more. Purple line? Red line? Where is it coming from?
Comptroller Franchot appears to be the only sane statewide leader at the moment...
Rob
9:21 am on Monday, January 16, 2012
I cannot wait to leave this state. The tax and spending has gotten out of control. We need to revolt and not give in to these absurd increases. Maybe the powers to be needs to take a reduction in salary and have less to spend like everyone else.
jimmy Haller
9:03 am on Sunday, January 15, 2012
Bravo, Mr. Zwick. I could not have said it better, if my checking account doesnt balance and I spend more than I earn, i would find myself in the same shape as..... well, Maryland. Want to see a whole bunch of buildings as well as a vehicle emissions inspection station that were built and then abandoned becaue they legally cannot be occupied? On rt. 124 across from the airpark. How about letting Ms. Leggitt have a checkbook so he can buy the Webb tract for millions for his folly. What are these politicians thinking? How can they be so blatently irresponsible? I dont want to see one penny of this new bag tax go for ANYTHING other than to restore the Bay as it is supposed to do.
Will
10:12 am on Sunday, January 15, 2012
"That same-old-same-old isn't really working too well these days. So, for that reason alone, let me be the first to say: Bravo, Governor."
Raising taxes to support unsustainable spending is not exactly a new and groundbreaking idea.
Jerry
11:15 am on Sunday, January 15, 2012
Increasing expenditures to exceed tax revenues is not exactly a new and groundbreaking idea either, and that's what happens every time. Tax increases are just a never ending spiral to financial disaster. The state needs alternate sources of revenue.
Jerry
10:45 am on Sunday, January 15, 2012
The unofficial state slogan for Maryland is, "If you can dream it, then we can tax it."
The article asks, "Gotta better idea?" You betcha! Maryland could, in fact, become an energy exporting state instead of speculating about absurd schemes like offshore wind turbines. For decades, the nuclear power plant at Calvert Cliffs has been humming away, generating electricity without mishap. We should expand its capacity and build additional nuclear plants around the state. Solar and wind just cannot compete. It takes 40 square miles of densely packed solar cells to equal the output of one moderate size nuclear power plant. It takes 2,000 noisy, ugly, bird killing wind turbines to equal the output of one moderate size nuclear power plant. The revenue from a nuclear derived energy surplus would ultimately transform Maryland's deficit into a budget surplus that would actually enable a reduction of taxes. There is enough thorium to fuel nuclear power plants for the next 100,000 years, ending our energy and related economic worries for the foreseeable future. It's time for a new era of unlimited energy and unprecedented prosperity, not draconian conservation measures, austerity programs, and oppressive taxation. The clear choice is between nuclear energy and continued financial crises.
Bob
12:33 pm on Sunday, January 15, 2012
I've got a better idea, O'malley. Stop the spending and pare back what you have now. That is a problem with you idiots in power. you think that everyone should give more when everyone is hurting due to your incompetent spending habits. You've raised taxes on evertything else, when are you going to tax the air we breathe? You need to be fired!!!
Jim Burnetti
7:59 pm on Sunday, January 15, 2012
Going to use the extra money to hire a state geographer - who can educate you about community boundaries, and toss your redistricting plan into the trash can where it belongs?
Willard
9:28 pm on Sunday, January 15, 2012
Bob--You are absolutely correct. Increasing the sales tax to six percent was bad enough. If he goes to seven, I will do even more of my shopping where I won't have to worry about the increase. I will also have no qualms about traveling a few short miles to shop in Pennsylvania and pay their sales tax.
Brad Welch
9:31 pm on Sunday, January 15, 2012
Sales tax hits the poor the hardest. The sales tax should not be increased.
RSK
10:58 pm on Tuesday, February 7, 2012
"occasionally has a new thought" hahahahahahahaha. Only a liberal reporter can make that claim about a typical tax and spend politician doing what he does best.