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.

Editorial: Tax 'Fairness' in Action

Originally published in the Wall Street Journal, A22

Published on Monday, October 01, 2007
Every state has its problems, but we're especially glad this month that we don't live in Maryland, where Governor Martin O'Malley has been undertaking something close to a tax-increase-a-day tour. In Ellicott City he proposed raising the sales tax to a rate of 6% from a nickel. The next day in suburban Baltimore he unveiled his plan to raise the top income tax rate to 6.5% from 4.75%. Last Wednesday in Landover he called for a doubling of the cigarette tax to $2 a pack. He has also endorsed a one percentage point hike in the state corporate income tax to 8%, new commercial real estate taxes, and a 12 cent hike in the gasoline tax to 35.5 cents a gallon. The Tax Foundation says Maryland already has the 23rd highest tax burden among the 50 states, but the Governor seems to be aiming for the top 10.

Editorial: Auction slots licenses

Originally published in the Baltimore Examiner

Published on Thursday, September 27, 2007
BALTIMORE - Finally. After a month of tax talk, the governor is pushing a way to raise money for the state that doesn’t include forced raids on residents’ bank accounts: Slots. On Tuesday, he said he favors adding about 9,500 slot machines in four locations across the state. We have long favored slots as a way to capture money that residents now spend in neighboring states. Gov. Martin O’Malley says it could raise about $600 million a year for Maryland.But the key is in the details. O’Malley did not release the minutiae of the plan but said he favors state ownership and would use the plan that passed the House of Delegates in 2005 as a model. That calls for four locations, none in Baltimore — which would exclude Pimlico from the cash cow.O’Malley should rethink state ownership of slots. The state has no expertise in running businesses. And if the $1.7 billion “structural” deficit can serve as an example of its financial expertise, it should not even touch the idea.Instead, the state should auction licenses to those who would return the highest portion of the proceeds to the state — a proposal outlined by the Maryland Public Policy Institute in its 2003 report, “Legalizing Video Slot Gaming in Maryland: A Business Analysis.”

O'Malley's sales tax hike is bad news for Maryland

Originally published in the Washington Examiner

By Scott Moody and Wendy Warcholik
Published on Monday, September 24, 2007
WASHINGTON - Last week, Gov. Martin O’Malley saw a hike in the state sales tax and expanding its scope as a key part of his solution to Maryland’s $1.5 billion budget shortfall. Before embarking on such a course, Maryland lawmakers should fully understand the negative economic consequences of raising taxes, the sales tax in particular.First, it is the nature of any tax increase to erode the economy by moving money from private investment and consumption. Taxes have “deadweight losses” that are permanent losses in economic activity.For example, a study by Harvard’s Martin Feldstein found that the estimated deadweight loss for the poorly designed 1993 federal tax increase was $15.9 billion — which is nearly twice the $8.4 billion in government revenues generated by the increase.

The Risks of 'Tax Reform' In Maryland

By J. Scott Moody and Wendy P. Warcholik, Ph.D.
Published on Thursday, September 20, 2007
Maryland lawmakers are currently considering how to close a projected $1.5 billion annual budget shortfall. One proposed solution is to broaden the tax base and increase tax rates so as to produce more tax revenue. In particular, there are calls to expand the retail sales tax base to cover certain services that are currently exempt. Before embarking on this course of action, Maryland lawmakers may want to consider some of the negative economic consequences of increasing taxes, which we will discuss in this paper.First, all taxes by nature have "deadweight losses" - losses to consumers and producers beyond the extracted tax as people respond to the higher relative price of goods. These losses are permanent losses in economic activity. In some instances, deadweight losses are larger than the resulting government revenue, making the tax highly inefficient. For example, one important study found that the estimated deadweight loss from the 1993 federal tax increase was $15.9 billion - nearly twice the tax's resulting government revenue of $8.4 billion. Thus, federal taxpayers incurred a cost of nearly $3 for each dollar transferred to the federal government by the tax increase - a tradeoff of dubious public welfare value. If tax increases are necessary, policymakers should tailor them to minimize deadweight loss.