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Tax Hikes and the Economy

by: Isaac Smith

Tue Sep 16, 2008 at 02:15 PM EDT

Maryland Republicans, as you might expect, opposed Gov. O'Malley's tax increases last year. Though they failed to prevent those tax increases, they understandably want to paint them in the worst possible light, both out of political conviction and out of a desire to hurt O'Malley's chances at reelection. However, their efforts to do so have, to date, come off as... well, like partisan hackery, rather than an honest attempt to assess the economic situation in Maryland. Seemingly ignorant of the fact that this country, Maryland included, has been in an ongoing financial crisis for the past year (one that has gotten significantly worse in the last few days), Maryland Republicans have taken to arguing that anything bad that happens to the state's economy is a direct result of O'Malley's tax increases. Which, if taken literally, is demonstrably false (e.g. Brian Griffiths claiming that the tax hikes are causing the recession in Maryland and again that they are depressing sales tax revenue); and, if taken more loosely -- i.e. that the tax hikes are exacerbating the economic downturn's effects in Maryland -- is usually just asserted, with no attempt to disaggregate the effects of the tax hikes from the broader economic trends.

Case in point: Troy Stouffer's piece in the Sun yesterday decrying the effects of the special session tax hikes on the state's economy. He writes:

Another point I found interesting is that revenue from taxes on cigarettes is also declining. This is because the tax increase of $1 a pack has caused a big drop in the sales of cigarettes. I thought that the increase in cigarette taxes was intended to help smokers quit their "nasty" habit. Why is a drop in cigarette sales seen as a bad thing? Could it be that it was never about reducing smoking but was just another way for the Maryland government to take more money from the citizens of the state?

Now there is an argument to be had here about the wisdom of using tabacco taxes to fund expanded Medicaid services (which Stouffer neglects to mention), but what's glaringly obvious is that, in an economic slowdown (and one accompanied by a dramatic spike in oil prices that has only recently come down), disposable income shrinks, and sales of luxury items like cigarettes will go down. There is the question, of course, of how much and how necessary smokers view their habit, but Souffer blithely ignores that for a liberal conspiracy to gobble up tax dollars.

One other thing to note. Stouffer says toward the end:

The only factor keeping the state economy afloat is our geographical position next to Washington, D.C.

Similarly, the only thing keeping Los Angeles' economy afloat is all the movie stars who live and work there, and the only thing keeping Alaska's economy afloat is oil (well, that and federal earmarks). Not only is it a non-sequitur, it's false: The port of Baltimore is still an economic driver in the state, and thanks to the recent growth in exports, even more so. Maryland, of course, is facing economic problems, but the beginning of wisdom here is having a good grasp of what is actually going on economically in the first place.

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The Washington Post Gets It All Wrong

by: Marc A

Mon Aug 18, 2008 at 01:26 PM EDT

Cross posted on myDD

Last week the Washington Post Editorial Board came out with an editorial blasting a second stimulus package as an unnecessary election year ploy:

We understand the political logic of a second stimulus; the economic case is less convincing. Any fiscal stimulus must be targeted, timely and temporary. That is, it must put money in the hands of people who are likely to spend it quickly -- while not committing the federal government to new long-term spending.

Naturally to make their case the Ed Board selectively picks and chooses which parts of the stimulus package to highlight.

House Speaker Nancy Pelosi has called for a $50 billion package, possibly including increases in food stamps and home heating assistance as well as more Medicaid money for states and new infrastructure spending. Fleshing out Ms. Pelosi's concept, Senate Appropriations Committee Chairman Robert C. Byrd (D-W.Va.) has unveiled $24 billion in proposed energy, infrastructure and disaster relief money.

We'll move beyond the fact that many people think supplemental medicaid funding is a really good idea to the more pressing point; the Wapo Editorial Board failed to mention or mention only in passing two plans that many experts say should be the staples of any second stimulus package; aid to states and infrastructure spending. AWall Street Journal article from last month (subscription only) shows Congressional leaders getting on board with the idea so I am lost as to why it received no attention in the Op Ed:

The bill, which would likely include spending on road projects and aid to stated, isn't expected to come up in the House until September

We proved earlier this year that stimulus checks on their own are not the solution to the nation's economic woes. However not recognizing the obvious need for help that states have been screaming about over the last several months is just irresponsible. Not to mention their editorial reads just barely on the sane side of illogical.

Their suggestion that we don't know the effects of the first stimulus yet is asinine. The Post even admitted this on Thursday. On page 10 of the Washington Post Express they ran an article entitled "Stimulus Checks Run Out"

Analysts said retail sales would have been more feeble without the $92 billion in rebate payments the government sent out in May, June, and July. Those checks helped to counter plunging home prices, rising unemployment, and soaring gasoline prices. The bulk mailings are now over, though, leaving economists worried about what will happen next.

WaPo can't have it both ways. They can't report that the stimulus checks are running out but then opine that we shouldn't have a second stimulus because we don't know the effects of the first.

And sure gas prices have been falling over the last couple of weeks, but today's national average for a gallon of gasoline is still $3.77. Am I glad its down from the high of $4.11 that we saw in mid July? Yes. Am I convinced that this means I don't have to worry about gas destroying my wallet? Absolutely not.

According to the Fuel Gauge Report, gas is still $4.07 in California where their budget crisis has gotten so bad that over 200,000 state employees had their pay rolled back to minimum wage. It's $3.89 in Michigan, where unemployment is skyrocketing. Its $3.98 in New York where Governor Patterson has been forced to slash medicaid by $500 million this year and $1 billion next year. The relief at the pump will be short lived because state governments don't have the resources to ensure normal citizens won't feel the pain of floundering state economies.

The Washington Post should know better. After all, the situation is going from bad to worse in their own back yard. A Richmond Times Dispatch article has Governor Kaine says the budget shortfall could surpass $1 billion. This coming on the heals of cutting $2 billion out of the budget this year. He says he's going to apply the same formula:

Kaine said he probably would apply the same basic principles to the next round of economies that he did previously -- to not cut across the board but target more precisely areas that can be reduced. Some lawmakers and lobbyists aren't sure that's possible.

I'm not sure thats possible either. There are a limited number of areas that can be reduced before you start having to cut education, public safety, health, and other essential services. We may be months away from the endgame, but counties and cities are bracing for the worst.

"We expect, and are preparing for, very bad news," said Michael L. Edwards, a lobbyist for the Virginia Association of Counties.

What the Washington Post fails to understand is that dealing with the nations economic problems has to go beyond fixes for the individual. I would love to receive another check in the mail but it's not what's going to fix this thing. The real solutions lie in federal aid to the states and spending on infrastructure, two moves that will help states who are being forced to make dramatic cuts to essential services and potentially create jobs in states were there are far two few of them. These solutions received little to no attention in the Op Ed, which is really the biggest flaw of all in the piece.

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Fact and Friction

by: Gilbert

Tue Jun 03, 2008 at 09:45 PM EDT

This guest  post is by Takoma Park resident Alain Thery.

*FACT*: According to a recent MontCo Planning Department housing study, between 1997 and 2005 Takoma Park residents experienced the highest increase in homeowners' costs in the County (while at the same time facing the highest decrease in median income).

Could this above average increase in homeowners' costs be related in any way to the sharp increases in property tax rates by the City during that period despite high increases in assessments toward the end of the period?  Between 2005 and today, this increase in property taxes was modulated somewhat by a 7% decrease in the rate while assessment during the period rose 30%.

Looking at the 5/27/08 TP Council meeting, it does not look that the Council members in their majority are even aware of the situation that has been created for residents by relentless double-digit annual increases in City budgets approved by past and present Council members.

Is this blindness the result of a clever manipulation by the City Manager that has become . . . 

There's More... :: (2 Comments, 654 words in story)

I Suppose Then George W. Bush and the GOP Are the Khmer Rouge

by: Isaac Smith

Thu Apr 10, 2008 at 02:51 PM EDT

So in his latest bout of hysteria, Brian Griffiths informs us that Martin O'Malley (in part) caused the recession through the special session tax increases. Which, if true, would be pretty weird, given that the housing and financial markets, the real drivers of the current recession, began crashing in the middle of last year, whereas the tax increases only took effect in the beginning of this year. Those must be some pretty powerful tax hikes.

Of course, Brian's point (I think) is that the tax increases are exacerbating the recession's effects in Maryland, which is debatable; certainly the Washington suburbs have been doing better than the national average in terms of employment, and Maryland's unique economic features make it more resilient to downturns generally. Things could get worse, however, if the state made the draconian kind of budget cuts that Brian and other Republicans have been clamoring for. As I've noted before, budget cuts during a recession are actually more harmful to the economy than tax increases, since it exacerbates the problem of falling consumption by reducing consumption even further.

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Tech Tax On Its Way Out

by: Isaac Smith

Thu Apr 03, 2008 at 04:00 PM EDT

The much-hated sales tax on computer services will likely be repealed this session. The Senate gave preliminary approval to a bill to replace it with a three-year income tax surcharge of 6.25% on people making more than $1 million a year, as well as $100 million in cuts -- half from the Transportation Trust Fund and half to be decided by Gov. O'Malley. Here's how they voted.
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Taxes, Transformation, and Credit Where Credit's Due

by: Eric Luedtke

Tue Mar 18, 2008 at 04:33 PM EDT

From Evan West in the comments to my previous post:

I can't tell you how frustrating it is to read something that I agree with on an abstract level only to get smacked in the face by what I see as a concrete contradiction.

I see what came out of the special session as a transformational, progressive change.  The O'Malley package was changed, but I think to say that it was gutted is an exaggeration.  There were compromises, no doubt.  Some of them were to the anti-slots factions.  O'Malley's package would have had the legislature enact a slots proposal immediately.  Instead, the compromise was to let the voters settle it.  More democratic that way, right?

O'Malley proposed that the top tax bracket be increased from 4.75% to 6.5% The compromise was 5.5%.  Obviously, this is not sweeping, proletariat-type change, but I'd call it progress.

The corporate income tax increase was boosted from 7% (fairly high already) to 8.25% in the special session version. Again, progress in my opinion.

It also managed to create the largest increase in Medicaid in a generation.

Isn't this what we stand for as progressives?  And yes, I am one.  

It bothers me when we see the first real, progressive change in our tax system in many years, one that took guts and is politically unpopular, pilloried by progressives as "not enough".

Evan's got a point, of course. Maybe we have focused a little too much on the failures of the past few months, rather than the important successes. And referring to what the Senate did as gutting is probably a little over the top. 

I agree that the creation of a progressive income tax structure in Maryland was a very good thing, and long overdue. And whatever complaints I have about the special session are moot now. In the long term, what I'm criticizing is the failure to discuss taxes as a public good - a way to continue to provide high-quality public services - instead of an infringement on individual rights, which is what the right wing thinks. That's the sort of transformational effort to change the playing field of public debate that I was looking for.

But in the interest of giving credit where credit's due: to Martin O'Malley, for having the courage to make the politically unpopular changes to end the structural deficit, something his predecessor was incapable of. To those state senators and delegates who fight for progressive causes, and who over the last few months brought us a progressive income tax, medicaid expansion, improved school funding through GCEI, and a new program to help save the bay. And to those same people for maintaining their commitment to progressive causes in a bad budget time during the current session.

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The Zombie Tax

by: Isaac Smith

Fri Mar 14, 2008 at 08:00 AM EDT

Gov. O'Malley has come out against the computer services tax, which is a good thing. The problem is, however, is that no one seems to know what to replace it with. Adam Pagnucco lays out the situation:

When the Republicans proposed spending cuts and tapping "unallocated funds" to pay for a repeal, the Senate rejected it. When Senate Democrats proposed an income tax surcharge on the rich, Montgomery County officials opposed it. Time is running out: the current session has less than a month left and the computer tax is due to take effect this summer.

The tragedy is that it didn’t have to be this way. Governor O’Malley never proposed this tax. The House of Delegates did not propose it. And there were other ways to raise the money...

Instead, we are left with a looming, devastating tax on a knowledge-based industry critical to the state’s future. Everyone hates it. But no one has figured out how to get rid of it. Surely the Democrats in Annapolis can do better than this.

Now it looks like support is growing for a income tax surcharge that would basically tack on new two tax brackets: 6% for people earning between $750,000 and $1 million and 6.5% for over $1 million. Opposition is coming, once again, from Montgomery County, whose delegation succeeded in watering down Gov. O'Malley's income tax plan last November. Something tells me they might succeed again, and this computer tax that no one wanted will survive.

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Republican Lawsuit Dismissed (Again)

by: Isaac Smith

Wed Mar 12, 2008 at 05:47 PM EDT

No surprise, really:

GOP lawmakers appealed a Carroll County Circuit Court judge's decision to dismiss their lawsuit, which alleged that the Democrat-controlled General Assembly acted unconstitutionally by not following technical procedures during the session.

But Robert M. Bell, chief judge of the Court of Appeals, ruled today to affirm the lower court's decision. Bell ordered the Republican lawmakers pay the legal fees associated with the appeal.

Bell's order was without comment. He is expected to file a longer ruling within a few days.

And so ends that little drama. I'll say, as I've said before, that Mike Miller and Mike Busch did a poor job at transparency during the special session; but to argue that a violation of procedural rules is so bad that nullifying the laws passed during that session is the only remedy reeks, I think, of desperation. But the Maryland GOP can take heart, I suppose, that Martin O'Malley has taken a hit in the polls over the tax package (the sales tax part, anyway).

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Almighty Booze

by: Isaac Smith

Mon Mar 10, 2008 at 06:01 PM EDT

I totally agree with Tom: scrapping the computer services tax and replacing it with an increased alcohol tax would be better for the state economy overall.

However, given the apparent power of the liquor lobby in Annapolis (as evidenced by the recent quashing of the bill that would legalize buying wine over the Internet in Maryland), I don't see that happening any time soon.

(Read the rest of Tom's post, BTW, for its skewering of the Republicans' smoke-and-mirrors budget proposals, particularly the part about eliminating "vacant positions" -- something that Democrats will likely be doing as well in response to the drop in state revenues.)

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What Is the Best Approach?

by: Isaac Smith

Sun Feb 24, 2008 at 12:43 PM EST

Tom Wilson's brief for a carbon tax is very, very good; and if I were made Czar of All the Atmosphere tomorrow, I'd probably back a carbon tax as my main policy tool for fighting global warming. (Indeed, the Congressional Budget Office recently concluded that a carbon tax would be more cost-effective than a cap-and-trade system.) But the political winds seem to be going mainly in the direction of cap-and-trade, so I think effort would be better spent on implementing the best cap-and-trade system we can. That, of course, can best be achieved by auctioning off all credits -- and in fact would make a cap-and-trade system very much like a carbon tax. In particular, auctioning would keep our system from going the way of Europe's, where the decision to hand out credits for free led to power companies reaping windfall profits -- and raising their prices anyway. After all, if you find an iPod lying in the street, nothing prevents you from selling it for a profit, even though it cost you nothing to get it.

Going back to the carbon tax, I also question the idea that it would be harder to game than a cap-and-trade system. As people starting to do their taxes for this year surely know, the mountain of deductions and credits and loopholes that make up most of the tax code make it extraordinarily complicated, and if a carbon tax were on the table now, I suspect it would get the same treatment -- i.e., interest groups would try to carve out exceptions for themselves or their constituents. Regardless of which way you go in terms of reducing carbon emissions, it's going to be a tough slog, and people concerned about global warming should be prepared for it.

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Assorted Links

by: Isaac Smith

Thu Jan 31, 2008 at 10:40 AM EST

  • The General Assembly is considering repealing a provision in the special session tax package that required homeowners to apply for a tax credit they had previously gotten automatically.
  • Prince George's County Council Chair David Harrington narrowly beats Rushern Baker to succeed the late Gwendolyn Britt in the state Senate. Harrington, you'll recall, was one of the handful of Prince George's Democrats who endorsed Michael Steele back in 2006.
  • Gov. O'Malley is backing a bill to require all new and renovated state buildings meet green building standards.
  • The 'beg-a-thon' for school construction money from the Board of Public Works begins.
  • Democratic leaders in the General Assembly are supporting a bill that would effectively boot state schools superintendent Nancy Grasmick from her job.
  • Why is Del. Sandy Rosenberg going to baseball spring training in Florida in the middle of the legislative session?
  • The Sun editorial page backs transit-oriented development.
  • Maryland, the District, and Virginia are forming a new partnership to promote sustainable economic devleopment.
  • Sen. Lisa Gladden gets caught promoting a 'red-headed Eskimo twin' bill. Read the post to see what I mean.
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Despite Remaining Deficit, Progress has Been Made

by: Andrew Kujan

Tue Jan 22, 2008 at 11:36 AM EST

So the state still has some budget woes. To be honest though, the special session went a long way towards helping narrow the gap.  If Miller manages to get slots through this session, many of these budgetary worries will disappear for the near future, or thats what we would like to think. 

There is still the issue of an economy on the downturn, and the difficulty in gauging how this downturn is affecting Maryland.  Either way, I believe that the media coverage of the Governor's budget is a bit over the top.  No where is it mentioned that Maryland is constitutionally required to create a balanced budget.  The Governor must submit a balanced budget and the legislature can only cut or restrict from that.

It is this fiscal discipline that keeps Maryland Triple-A bond rated year in and year out, while still allowing state to spend liberally on important social, educational and environmental programs.  Senator Madeleno put it something like this: "Maryland is a state with Liberal spending and conservative, consititutionally mandated money management".  

Can we do better, yes.  Are we doing better than some?   O'Malley and Democrats are doing the necessary dirty work to keep the State running at the level it's citizens deserve.  I can't say the same about our previous Governor.

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Awful Time for Higher Taxes

by: ScottGoldberg

Tue Jan 22, 2008 at 07:38 AM EST

As the stock market plummets today (Tuesday, January 22) and Americans stop spending money, specifically spending money on taxable goods and services, what will happen within the Maryland Treasury? 

All those tax increases (sales, computer, top income earners) will become less- or completely irrelevant.  The money from "increased" revenue sources has already been spent and very soon, even the "increases" won't be enough to keep up with the spending.

 What Maryland should have done and can still do is slash spending.  Yes, even if it might decrease such vital services as plastering "Governor Martin O'Malley" on highway signs.

In the bad economic times, you make it easier on your citizens by cutting taxes and in the plush times you can collect a little more and save it for a rainy day.

As progressives, we should start advocating that sendning money to Annapolis isn't the answer and leaving it in the pockets of Marylanders is the best solution in unsure economic times.

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Franchot's Speech

by: Isaac Smith

Mon Jan 21, 2008 at 12:10 AM EST

Having read the Comptroller's State of the Treasury report from Friday, it seems to be a pretty good diagnosis of the current economic trends affecting the state and the country, along with a good deal of trumpeting of his efforts to collect unpaid taxes (Franchot critics, take note), some potshots at Martin O'Malley and the General Assembly, and some anti-slots boilerplate. The collapse of the housing market is, of course, driving the current economic downturn, but the hastily-assembled special session on the budget last November may not help matters for Maryland:

I am particularly troubled by the expansion of the Maryland sales tax to computer services.  I spoke out in public opposition to this proposal when it was rammed through during the closing days of the Special Session, and I feel the same way today.  This technology tax, if allowed to stand, will erode Maryland’s competitive advantage in the Knowledge-based economy.  
The computer services tax will take a disproportionate toll on those small and independently-owned businesses that are the backbone of strong communities.  Furthermore, the way in which it was adopted will inevitably diminish Maryland’s hard-earned reputation as a good place to do business.  It is in this spirit of concern that I call upon my friends in the General Assembly and the Governor to repeal the computer services tax, and call upon each of you in this room to join me in this effort. The last thing we need is another tax increase, especially one that will undermine our Knowledge-based economy and damage our long-term economic success.

It is, of course, widely acknowledged that Mike Miller and company chose the computer services taxes for basically, no good reason, so I hope the General Assembly revisits the matter. The problem is, Franchot doesn't propose any replacement sources of revenue, or what he would cut from the budget, if necessary; likewise with slot machines. (And I presume even improved tax collection wouldn't be the entire answer.) Anti-slots advocates, and opponents of draconian budget cuts generally, need to be clearer about what the alternatives are to the fiscal status quo, which right now favors slots. There are plenty of possibilities, some of which Eric discussed a while back; but the problem is, Marylanders are already sore about the sales tax increase, any attempts to change marginal income tax rates are likely to run into opposition from Montgomery County again, and hardly anyone has an appetite for more budget cutting. Consequently, despite all the problems involved with slots, it's going to look a lot more appealing as we head toward the referendum in November.

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Assorted Links

by: Isaac Smith

Fri Jan 18, 2008 at 12:04 PM EST

  • The latest finding in the Baltimore Sun poll: School superintendent Nancy Grasmick gets a C+ rating from voters, with a plurality (44%) in favor of replacing her with someone new.
  • Despite concerns that the tight budget situation would prevent it, Gov. O'Malley will indeed provide funding for replacing touch-screen voting machines with paper ballots. In addition, the state Board of Elections is getting a grant from the Pew Center on the States to monitor the integrity of our voting system.
  • Gov. O'Malley may be allocating $100 million for the Purple Line, but David Lublin isn't impressed.
  • Dan Rodricks argues for a higher alcohol tax, which may well happen.
  • Jay Hancock: The Public Service Commission's case against Constellation Energy is strong, but won't be effective.
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Baltimore City Blue Ribbon Commission on Taxes

by: Melissa

Wed Jan 16, 2008 at 10:15 AM EST

I'm sorry for the short notice but thought some Free State readers might be interested:

Blue Ribbon Committee on Property Tax Reform

Public Comment Meeting TONIGHT, JANUARY 16, 2008, 7-9 PM at Baltimore Polytech, Falls Rd. and Cold Spring Ln. Register to speak at 6:30PM. The school is on the #27 and 33 bus lines and not too far from the Cold Spring Ln. stop on the light rail (half a mile at most). You can post email comments and read the Commission's report here (100+ pages).

As most readers probably know, Baltimore City's property tax rate ($2.268 per $100) is quite high -- more than double that of surrounding counties. Of course, Baltimore City also spends more on services, particularly law enforcement.

The Committee recommended a number of strategies to reduce the city property tax that would not require state approval, including increasing the hotel tax rate to 10% (by way of comparison, the hotel and sales tax in DC is 14.5%); increasing the homestead tax credit to 10% (the current cap is 4% per year; this protects homeowners from overwhelming tax increases year-to-year); increasing the income tax rate to 3.2% from 3.05%; expand the recordation and transfer tax; increasing fees and fines in other areas; and raising the vacant property fee from $30 per year.

Other strategies include raising local sales tax; commuter tax on people who work, but do not reside, in the city; and a local earnings tax for all work in the city, regardless of residence.

I am opposed to a further hike of the sales tax. It is regressive and the statewide sales tax was just increased. I have serious misgivings about raising the income tax or creating a local earnings tax -- it seems like robbing Peter to pay Paul. And I have serious misgivings about the viability of a commuter tax.Will businesses choose to relocate or stay in Baltimore City if their employees are subject to a commuter tax or local earnings tax, even if their property tax is a bit lower? I doubt it, given that the initial reduction would result in Baltimore City tax rates remaining well above the surrounding counties. 

I'd be interested in raising the homestead tax credit if there was some sort of protection for low-income residents (perhaps those eligible for the EITC?) 

I am VERY interested in raising the vacant property rate. I live in Charles Village where the majority of the homes are occupied. But just a few blocks east, there are literally entire blocks of abandoned property in various states of disrepair. In other parts of the city, there are long-vacant properties that could well be put to better use. For example, the Chesapeake Restaurant, just north of Penn Station, has been closed since the late 80s or early 90s, but I understand that the current owner, Robert Sapero, is battling the city over quick-take eminent domain. 

Your thoughts?

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Sun Poll: Tax Increases, O'Malley Unpopular

by: Isaac Smith

Mon Jan 14, 2008 at 01:40 AM EST

I don't think Democrats can spin it any other way, so I won't even try: The recent tax increases are not going over well, and Gov. O'Malley is suffering in the polls for it:

Voters are profoundly dissatisfied with the $1.3 billion in tax increases passed during November's special legislative session, and a majority consider the package unfair, according to a new Sun Poll.

As a result, public approval of Gov. Martin O'Malley, a Democrat, has dropped precipitously, particularly among the blue-collar voters he says he sought to protect in crafting a solution to the state's projected budget shortfalls.

Just over a year after O'Malley won 53 percent of the vote, only 35 percent of voters approve of the way he's handled his job.

In one of the nation's most staunchly Democratic states, O'Malley's approval rating is just 8 percentage points above President Bush's rating in the same poll. O'Malley's job approval numbers are also close to 10-year lows in how Marylanders have felt about the work of their governors.

"He's given away all of his political capital on this special session," said Steven L. Raabe, president of OpinionWorks, the polling firm that conducted the survey for The Sun. "He probably needed to do it from a policy standpoint, but one could question the manner in which it was done because it has come at a great cost to his ability to lead the state."

As I said, Democrats ought to take this poll seriously; that said, we can contextualize, to use a term of art, the findings of this poll:

  1. The US is either in, or the threshold of, a recession; given increased anxiety over the economy, therefore, it makes sense that Marylanders are going to be less receptive to tax increases.
  2. It seems much of the discontent is over the sales tax, the most regressive apsect of the special session's budget package, and one that many progressives were concerned about -- especially after the Montgomery County delegation succeeded in watering down Gov. O'Malley's income tax plan.
  3. It would have been interesting to see the Sun's polling firm ask the question, "If you had to choose between the General Assembly's tax package or large cuts to education, transportation, etc., which would you prefer?" Because, of course, that's what matters: It's not "tax increases or ponies," it's "tax increases or reduced investment in public priorities."
  4. This whole affair, I think, is an object lesson in why separating taxes from spending is a really stupid idea, especially in state government, where deficit spending is not an option. It would have been vastly preferable for the General Assembly to have passed the Thornton education plan in 2002, say, with a dedicated revenue stream, even if that made passage far less likely. The alternative is what we have here: People being asked to contribute more to close a deficit (i.e. unspecified government spending) rather than something concrete. One wonders why supposed political geniuses like Mike Miller didn't see this coming.
Discuss :: (1 Comments)

End of Year Blogging

by: Isaac Smith

Sun Dec 30, 2007 at 10:00 AM EST

So I left the Internet for a few days and now I'm completely out of the loop. Strangely enough, I don't think I missed it all that much.

I don't have much to say right now, but in an effort to clear my browser tabs, let me post a few links of note:

  • Tom Wilson wonders why Republicans are pursuing a self-marginalizing strategy, both in the 1st District congressional race and nationwide. Good question.
  • Andrea Batista Schlesinger of the Drum Major Institute reviews the 10 best and 10 worst public policies of 2007, with Maryland's living wage law coming in at no. 9 on the 10 best list.
  • David Sirota connects Iowa and New Hampshire's inexplicable influence on presidential primary elections to the arcane electoral college.
  • Two from Blog Arundel: Tax rates among the counties compared, and why the 'flush tax' is a model for funding improvements to infrastructure.
  • Off-topic for this blog, but Wired's blog Danger Room has a good roundup of links on who may have killed former Prime Minister of Pakistan Benazir Bhutto.
  • Jay Hancock's most recent column dovetails neatly with last week's conversation about taxes and economic flourishing. In short, investing in education and infrastructure -- and paying the taxes to fund it -- does indeed make your state a better place to do business; just ask North Carolina.
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Sales Tax Options

by: Eric Luedtke

Wed Dec 19, 2007 at 08:56 PM EST

Momentum seems to be building for the Assembly to revisit the haphazard expansion of the sales tax to computer services and no other services during the special session. No one seems to be particularly happy with that outcome. Put simply, there was no fair standard applied, and computer services was picked largely because it fit a hole in the package.

So what are the options? 1. Eliminate the computer services sales tax and add nothing else, which leaves another hole in the budget.  2. Drop computer services but apply the sales tax to other industries (there are dozens of services not currently taxed, even beyond those discussed during the special session). But then you have the same problem of explaining why one or more industries are taxed while others aren't. Or 3. Apply a smaller (1-2%) sales tax to a broad range of service industries.

The last is my favorite - it allows for application of a fair standard, lessens the impact due to the lower rate, and spreads that impact across a number of industries. But, and this is important, any sales tax expansion needs to apply to services that can be classified as luxury services. The Maryland Budget and Tax Policy Institute has pointed out that the special session package was regressive overall. So the fair standard has to be this: if taxing a specific industry would have an unavoidable effect on the bottom line of working families, that industry should not be taxed. So, health clubs? Yes, because there are other options for exercise. Car repair? No, because for a lot of working families not being able to get your car fixed means you can't get to work, especially in more rural parts of the state where transit is not an option. Until Salisbury gets a subway, that is.


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Another Fine Mess

by: Isaac Smith

Wed Dec 19, 2007 at 04:27 PM EST

Thought the state's budget problems were solved? Think again:

With a slowing economy, Maryland legislative analysts are projecting another shortfall in the state budget by fiscal 2010 -- though the gap is far smaller than the one that prompted Gov. Martin O'Malley (D) to call a special session this fall.

In 2010, the projected hole in the state's $15 billion general fund is $237 million. It is projected to grow to $263 million the following year, analysts told the Spending Affordability Committee yesterday.

This appears to be one more aspect of what the subprime mortgage crisis -- or "Big Shitpile," as the blogger Atrios has been calling it -- has wrought. States, of course, are heavily dependent on property taxes for revenue, and up until about a year ago, a frighteningly large number of people thought housing prices were going to go up forever. So when housing prices eventually did come down, you had all these mortgages, being bought and sold on the financial markets on the premise that housing prices would indeed go up forever, suddenly go to rot. So now we have the credit markets freezing up, possibly causing a recession; and states, meanwhile, will likely see their revenues fall not just in property taxes, but in sales and income taxes as well. And states, unlike the federal government, cannot run deficits, so we will likely see, as the article states, some more budget cuts in the future. Fortunately, we probably won't need another special session to deal with it.

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