A Growing Fiscal Concern: Medicaid Spending In Maryland

By Marc Kilmer
Published on Wednesday, January 09, 2008
In a special session in late 2007, Maryland's General Assembly expanded the state's Medicaid program. Given that this special session was convened to deal with the state's deficit, expanding a program that has caused financial challenges for the state seems an odd decision. Over the past 15 years, this program has strained state budgets, especially during times of economic recession. A different approach is needed.Maryland contends with a long-term budget deficit and faces the possibility of a slowing economy. In this economic and fiscal climate, state policymakers should seek alternatives to Medicaid expansion. Steps to make health insurance more affordable for Marylanders and fundamental reform of the structure of Medicaid would benefit Marylanders more than expanding an expensive program.Anyone considering Medicaid expansion should keep in mind the state's recent experience with Medicaid and the Maryland Children's Health Program (MCHP). Looking at spending patterns in the years since 1992 gives a good snapshot of how Medicaid and MCHP work in both good economic times and bad. Medicaid occupies a significant share of the state budget and squeezes out spending on other programs during economic hard times. Although Medicaid is known as a program that is needed to help people who are in difficult economic circumstances, only during 1998 did spending actually decrease despite many years of high economic growth.

The 3-minute interview: Christopher Summers

Originally published in the Baltimore Examiner

By Sara Michael, The Examiner
Published on Thursday, December 06, 2007
BALTIMORE - Christopher Summers is the president of the Maryland Public Policy Institute, a conservative think tank that focuses on state public policy issues. He spoke with The Examiner about budget surpluses and why taxpayers should care.Is having a budget surplus a sign of good fiscal policy? Sure, it can be, but you also have to look at what the revenue is generated from. It's tax on residents. Maybe the tax policy is too aggressive. Impact fees and transfer fees are supposed to cover infrastructure, but if it's not being spent on that, it's a fiscal shell game. They are scamming the taxpayer. Long-term fiscal planning should ensure there is neither a surplus nor a deficit.

Pricier Cigarettes are No Budget Panacea

By J. Scott Moody and Wendy P. Warcholik, Ph.D.
Published on Friday, November 16, 2007
Governor O'Malley plans to close the $1.7 billion budget deficit with a dramatic $1.00 increase in the cigarette tax to $2.00 per pack from $1.00 per pack-a 100 percent increase. This proposed tax hike comes on the heels of an 83 percent increase in FY 2000 (to $0.66 from $0.36) and a 52 percent increase in FY 2002 (to $1.00 from $0.66). The Governor estimates that overall, this panacea would generate $166 million in new revenue in FY 2009 (the first full FY under the new tax increase).This revenue estimate does not account for cross-border cigarette shopping, or smuggling, undermining any revenue gain. Cross-border shopping for cigarettes is a nationwide phenomenon and is particularly common where cigarette prices vary widely between states.[1] Differences in the tax rates between states encourage people to buy cigarettes over state lines.[1] Fleenor, Patrick, "How Excise Tax Differentials Affect Interstate Smuggling and Cross-Border Sales of Cigarettes in the United States," The Tax Foundation, Background Paper No. 26, October 1, 1998. www.taxfoundation.org/publications/show/127.html

Editorial: Yes to slots, no to referendum

Originally published in the Baltimore Examiner

By The Examiner
Published on Thursday, November 15, 2007
BALTIMORE - We need a slots referendum like our culture needs the now defunct "The Man Show." On many issues voters should have their say. And on slots they have. Citizens have had years to speak their minds. Legislators know what their constituents think. Lawmakers need to take act. Pass this law. The irony is Gov. Martin O'Malley suggested the referendum. He is the same governor who called an "emergency" special session because the state could not wait one more minute to hike revenue any way possible. A referendum, assuming three-fifths of state legislators approve, would not make it to a vote of the people until next fall. This begs the question: Are tax hikes being debated in the special session really necessary? 

Realtor group decries proposed tax

Originally published in the Baltimore Examiner

By Aaron Cahall, The Examiner
Published on Wednesday, October 31, 2007
The Maryland Association of Realtors is speaking out against a proposed extension to a state real estate tax, with ads in local newspapers and a rally at the State House planned for Thursday morning. O'Malley's plan would expand the state's 5 percent sales tax to certain service industries, and increase it to 6 percent. Among the services targeted for the tax are property management companies. Maryland Association of Realtors President Carole Maclure said the other services falling under the tax would be tanning salons, health clubs and tattoo parlors. "We understand taxes on luxury service, but real estate is already taxed," Maclure said. "We don't believe we're a luxury service. We're a commodity that is the fabric of the community." Maclure and other local Realtor association leaders are expected to testify against the tax during the General Assembly's special session, she said. The association will hold a rally and visit state lawmakers on Lawyers Mall at the State House at 11:30 a.m. Thursday.

Maryland’s Competitiveness Would Fall Sharply, Tax Burden Rise Under O’Malley Tax Plan

Business climate falls to 43rd best, tax burden rises to 11th highest

Published on Tuesday, October 30, 2007
Washington, DC, October 26, 2007 -At a press conference in the shadow of the State Capitol dome in Annapolis today, the Tax Foundation, joined by the Maryland Public Policy Institute, unveiled a new study revealing that Maryland's competitiveness will fall sharply if the tax changes proposed by Governor Martin O'Malley are enacted."Lost in the rush to increase taxes is the crushing impact these tax increases will have on Maryland's competitiveness," said study author Curtis Dubay. "Maryland's increased tax burden and less competitive business tax climate will severely lessen the state's ability to attract new or expanding businesses and their jobs."

Tax Cuts Are Not To Blame For Maryland's Budget Woes

By J. Scott Moody and Wendy P. Warcholik, Ph.D.
Published on Friday, October 26, 2007
According to Maryland Gov. Martin O'Malley, much of the blame for the state's current $1.7 billion budget deficit belongs to tax cuts that enacted by the legislature and former governor Parris Glendening over a decade ago. But a careful look at Maryland tax revenues and spending patterns in the years following those tax cuts reveals a very different picture. Chart 1 and Table 1 illustrate the growth differentials between state tax collections and state expenditures for fiscal years (FY) 1996 to 2005 (the latest year of data available from the U.S. Census Bureau).Between FY 1996 and FY 2000, state tax collections grew at a rate faster than state expenditures. That is not surprising given the booming stock market at the time. After the so-called "dot.com" stock market collapse, the terrorist attacks of September 11, 2001 and the subsequent national recession, the growth in state tax collections slowed dramatically but, despite the economic challenges, grew 1.8 percent between FY 2001 and FY 2003. In comparison, state spending roared ahead by a staggering 14.5 percent between FY 2001 and FY 2003, rising from $21.5 billion to $24.6 billion.

2 groups denounce O'Malley tax plan

Originally published in the Baltimore Sun

By Laura Smitherman and Kelly Brewington
Published on Friday, October 26, 2007
Sun ReportersOctober 26, 2007Gov. Martin O'Malley said today he's confident that he will secure the votes needed to pass his budget solution in the General Assembly special session that starts Monday."I believe that the votes will be there for this to be a successful special session," the governor said in an interview.O'Malley has proposed a combination of tax measures and spending cuts to close a projected $1.7 billion budget shortfall for the fiscal year that begins July 1. He has previously said that he is inclined to ask for a voter referendum on whether to legalize slot machine gambling."There will certainly be some tweaks as you see the bills later on today and certainly some changes to the slots legislation," the Democratic governor said around noon. "But overall, the components of the packages we have all been talking about over the last three weeks with the public we all serve are pretty much going to be the components that we introduce."O'Malley has outlined a plan that calls for an increase in the state sales tax from 5 cents to 6 cents, extending the tax to cover more services, changing the income tax structure so that high earners pay more and low- and middle-income filers pay less, an increase in the corporate income tax rate from 7 percent to 8 percent, closing corporate loopholes and a property tax reduction.

The Maryland Public Policy Institute Hails Court Ruling on Funeral Homes as a Victory for Consumers

Published on Monday, October 22, 2007
ROCKVILLE, MD, October 22, 2007: Last week, the public interest law firm Institute for Justice reported that U.S. District Court Judge Richard Bennett in Baltimore struck down as unconstitutional a Maryland law that held back competition in the funeral services industry.Judge Bennett described the ban as "the most blatantly anti-competitive state funeral regulation in the nation."

Cigarette tax increase plan is flawed

Originally published in the Baltimore Examiner

By Marc Kilmer
Published on Thursday, October 04, 2007
BALTIMORE - As part of his effort to close Maryland’s structural deficit, Gov. Martin O’Malley has set his sights on a favored taxman target: Cigarette smokers. The governor has floated the idea of doubling Maryland’s $1-a-pack tax on cigarettes, rekindling a proposal that died in the state Senate last spring. This raises a question: Why should cigarette smokers have to pay off so much of the state’s budget deficit? Moreover, is increasing Maryland’s fiscal dependence on the cigarette tax such a good idea? Anti-smoking advocates often claim that high cigarette taxes are justified because smoking imposes huge costs on society. Though it is true that smoking does impose some social costs, academic studies show those costs are dwarfed by the taxes already assessed on cigarettes. Cigarette users cost society around 32 cents a pack. The additional 68 cents that Maryland collects on each pack of cigarettes, plus any additional tax that Gov. O’Malley may implement, does not compensate for smokers’ cost; it is merely a subsidy going from smokers to everyone else in Maryland.