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.

Deficit talks held behind closed doors

By Len Lazarick, The Baltimore Examiner
Published on Tuesday, September 18, 2007
Annapolis - Gov. Martin O’Malley and lawmakers have met behind closed doors in the last few months to discuss how to cure the state’s $1.5 billion budget shortfall, which appears to contradict O’Malley’s campaign vow to make government more transparent. “Maryland is a state where the governor and legislative leaders meet behind closed doors,” said Roy Meyers, professor of public budgeting at University of Maryland, Baltimore County. “They tend to make their decisions, and then try to sell them to the public. That is Maryland’s political culture.” O’Malley meets this morning with a score of top Democratic lawmakers to lay out his plan for remedying the state deficit next year. No Republicans are invited.O’Malley briefed House Speaker Michael Busch and Senate President Thomas Mike Miller on Monday afternoon, and the governor’s staff discussed it with Miller’s and Busch’s aides before that, but they gave the aides no written documents, the legislative staff said.

Editorial: Don’t drink the tax Kool-Aid

Originally published in the Baltimore Examiner

Published on Wednesday, September 12, 2007
BALTIMORE - The tax code favors the rich? That’s Gov. Martin O’Mal-ley and certain Democratic state legislators’ deceptive potion as they canvas state media declaring the need to raise taxes on everyone in the form of higher state income and sales taxes to finance the $1.5 billion “structural” deficit.“We need to move on to the really unpleasant and unpopular questions of how we reform our tax code,” O’Malley said last week on WYPR. “Over the last several years, we have a tax code that has become less progressive and more regressive. I think we can do better.” Yes, we can. But the main issue is not class inequity — it’s legislators’ failure to match spending to revenue.Besides, less than 5 percent of Marylanders pay more than 50 percent of the state’s total tax take. Should those 5 percent pay 75 percent? 90 percent?But this is not a tax code issue, it’s a fiscal responsibility one — and it won’t go away.According to the Maryland Public Policy Institute’s “Guide to the Issues,” “Left unchecked, aid to local education will consume 36 percent of the general fund budget by 2011, crowding out other spending priorities.”

Editorial: Un-economic development

Originially published in the Baltimore Examiner

Published on Friday, September 07, 2007
BALTIMORE - A state audit released Thursday shows Gov. Martin O’Malley and Maryland’s legislators are not yet serious about cutting waste. If they were, they would disband the Maryland Economic Development Corporation. MEDCO’s debt skyrocketed 200 percent from 2000 to 2006 to $1.9 billion, largely due to perpetually money-losing “economic development” ventures, including the Rocky Gap Lodge & Golf Resort in Cumberland. The $26.9 million black hole boasts a “forested mountain setting,” “pristine 243-acre lake,” and “Jack Nicklaus Signature Golf Course” which “gives you a new perspective on the wonders of golf.” Sure does.Other troubled projects include the Chesapeake Hills Golf Course — as of last June it was $1.3 million in debt, $250,633 to MEDCO and $934,000 to Calvert County. None of this is new information. Yet no one has pushed MEDCO officials to either come up with a plan to salvage the projects or offload them from taxpayers’ obligations.

Repealing ’97 income tax cut is a ‘sensible’ plan, delegate says

That would bring in $588 million to the state, and stop need for slot machines, Simmons says

By Douglas Tallman | Staff Writer, The Gazette
Published on Wednesday, August 29, 2007
In the ongoing debate on the Maryland budget, a Montgomery lawmaker is proposing the state roll back a 10-year-old income tax cut to help plug a projected $1.5 billion gap between spending and revenue.‘‘It’s sensible, moderate, centrist, plausible and familiar,” Del. Luiz R.S. Simmons said.Simmons provided an analysis from the Department of Legislative Services that says reversing the tax cut would raise $588 million, which would fill more than a third of the gap between spending and revenue forecast for fiscal 2009.Simmons (D-Dist. 17) of Rockville and other lawmakers will return to Annapolis in January to pass a budget for fiscal 2009, a 12-month spending plan that begins July 1.But such a tax increase could send a ‘‘dangerous message” to Maryland taxpayers, said Christopher Summers, president of the Maryland Public Policy Institute in Germantown.‘‘The legislature is saying we can’t change our spending habits, but we want more of your money,” Summers said.

Campaign season means costly promises — but not just to voters

Originally published in the Baltimore Examiner

By Stephen Janis, The Examiner
Published on Thursday, August 23, 2007
BALTIMORE - After the Sept. 11 primary election, the city’s taxpayers may be left holding the bag while outsiders count the cash. Some fear that political donations by out-of-town companies with lucrative city contracts could put pressure on mayoral candidates to bow to special interest groups. “The forgotten minority in Maryland and in Baltimore is the taxpayer,” said Christopher Summers, president of the Maryland Public Policy Institute. “Whether it’s education or other services, taxpayers in the city are getting a terrible return on their investment.”Campaign donations to Mayor Sheila Dixon include out-of-state companies who have fed or are feeding at the city’s trough, according to city’s financial records.

House Republicans offer own budget plan

Originally published in the Gazette

By Sean R. Sedam | Staff Writer
Published on Friday, August 17, 2007
OCEAN CITY — Slot machine gambling roared back into the state budget debate this week as Republican lawmakers outlined a plan for solving the $1.5 billion deficit and the O’Malley administration released a report proposing slots as a way to make Maryland’s struggling horse racing industry competitive with that of neighboring states.

Report makes case for Md. slots

Originally published in the Baltimore Sun

By Andrew A. Greeen | Sun Reporter
Published on Wednesday, August 15, 2007
The O'Malley administration released a report yesterday that concludes slot machines are necessary to protect Maryland's racing industry, giving the strongest indication yet that the governor intends to make expanded gambling part of his plan to close a projected $1.5 billion budget gap.Labor, Licensing and Regulation Secretary Thomas E. Perez made the finding after visiting racetracks in Pennsylvania, West Virginia and Delaware, examining revenue statistics, and counting Maryland license plates in their parking lots."Tens of thousands of Marylanders are voting with their feet and traveling to West Virginia and Delaware to play slots," Perez wrote in his report to Gov. Martin O'Malley. "By not having slots, Maryland has already left hundreds of millions of dollars in potential general fund revenue on the table."His findings dovetail with the position that O'Malley has espoused for two years: Maryland should have slots at tracks such as Laurel Park and Pimlico to protect the industry, the jobs that depend on it and the open space created by horse farms.