The Maryland legislature should consider lowering the gambling tax in Western Maryland to lure a slots casino operation to a struggling state-owned resort hotel, a senior state official said Wednesday.

Robert C. Brennan, executive director of the Maryland Economic Development Corp., urged a state commission charged with handing out five casino licenses not to seek new bids for the Rocky Gap State Park site in Allegany County until the General Assembly "re-evaluates" the 67 percent tax rate - among the highest in the country - that it had imposed.

Of the five casino sites approved by Maryland voters last year, the rural Rocky Gap location, developed by Brennan's agency, was the only one to receive no qualified proposals. "The math just makes it more difficult to attract a gaming company to that operation," he told commissioners.

Senate President Thomas V. Mike Miller said he would support a reduced tax rate for Rocky Gap and suggested Gov. Martin O'Malley introduce such a bill in the legislative session next year. Miller noted that nearby states have lower tax rates than Maryland. "When you're in business, you have to constantly adjust to market your product, and we're asking people to market this product with their hands tied behind their backs," he said.

Meanwhile, there were signs of progress on a proposed slots casino south of downtown Baltimore. The city has begun demolishing a vacant chemical factory near the would-be slots parlor, just south of the football stadium.

Michael Cryor, a spokesman for Baltimore City Entertainment Group, the sole entity vying for Baltimore's slots license, said the group would formally expand its bid within a month from 500 to 3,750 machines. After Wednesday's meeting, Donald C. Fry, chairman of the slots panel, said commissioners would discuss Brennan's tax-reduction recommendations with state-hired consultants. Critics have long said that policymakers crafted an unworkable slots program that discourages bidders.

Christopher Summers, president of the right-leaning Maryland Public Policy Institute, said legislators missed an opportunity to implement slots before the recession and now is in a weak negotiating position.

"I've been joking that Maryland might be the first state to lose money by expanding gambling," said Summers, who characterized calls for a lower tax rate a "sign of desperation."

State officials are counting on about $600 million in annual slots-related tax revenue to partly fix a structural deficit within three years. A big chunk of that projected money is in jeopardy because of a zoning fight in Anne Arundel County, where some local politicians and residents are fighting to block a proposed mega-casino at Arundel Mills Mall.

Fry said Wednesday that the commission would continue to evaluate the Arundel proposal - put forward by Baltimore developer The Cordish Cos. - regardless of action taken by the County Council.