http://www.examiner.com/a-989701~Tax_cuts_or_hike_coming___It_depends.html

Len Lazarick, The Baltimore Examiner

October 15, 2007
 

BALTIMORE -

Gov. Martin O’Malley continues to insist that the vast majority of Marylanders will see their taxes cut in the revenue “reforms” he will ask the legislature to embrace in the special session being announced today.

Skeptical conservatives and business lobbyists scoff that most residents will actually get what real estate people like to call a “haircut” — a slice of your money off the top, leaving a little less in your wallet.

It’s hard to say which is correct. We are still relying on the governor’s PowerPoint slides for the details, using budget department estimates; we’re not relying on legislation printed in black and white. But somehow the governor raises $1.5 billion in new revenue — $2 billion four years from now — yet he promised four out of five people will pay less.

Whether that’s true depends on your age, income, marital status, housing choices, lifestyle, spending habits and transportation options.

Singles making less than $100,000 a year, or a family of four making twice that, appear to get a tax break — if they own their homes and don’t smoke, drive a car or play the slots. Senior citizens and anyone making less than $30,000 will get additional tax credits.

In calculating “tax cuts,” the O’Malley PowerPoint factors in increases in the sales tax everyone will pay, the income tax hike for the wealthiest, reductions in the property tax rate and lower income tax rate at the bottom. It does not count proposals to double the cigarette tax, index the gas tax, hike the vehicle titling (sales) tax or raise the corporate income tax.

Most of the tax hikes that are not counted do not go toward curing the deficit, but to cover new spending on health care and transportation needs. The governor’s “fair plan” does not allocate any money citizens might spend on slot machine gambling in future years — estimated at about $100 per capita, but actually hundreds more for those who will actually play the slots.

But if the transportation taxes pass and that family of four buys a new $25,000 minivan and drives it 15,000 miles next year, they’ll pay $250 more for the van and $140 more for its gas — three to four times as much as any savings they’ll reap from other parts of the plan. And if they are fitness club members, they’ll pay another $30 to $40 a year for sales tax for that.

Single adults have their taxes trimmed minimally — less than $35 under the plan. The unfit single guy or gal who smokes five cigarettes a day and drives a gas-guzzling SUV 15,000 miles a year will see the state take $300 more per year. If he or she rents or pays a condo fee, the new 6 percent tax on property management services will likely get passed along in their monthly bills, but could be offset by the landlord’s property tax cut.

The governor’s plan does not even try to estimate who will pay for $150 million in new corporate taxes.

So if Marylanders want to be sure to pay lower taxes, they should stop smoking, stop driving, stop spending so much on luxuries, cancel their fitness club membership, walk to work and stop making so much money.

O’Malley’s Deficit-Cutting Plan

Problems:

» Fill a $1.7 billion deficit

» Cover more people without health insurance

» Pay for long-delayed road and transit projects

Solutions:

» Raise the sales tax from 5 percent to 6 percent --$730 million

» Expand sales tax to more services — fitness, tanning, massage, property management — $74 million

» Raise personal income tax for those making more than $185,000 a year from 4.75 to 6 percent, and to 6.5 percent for income over $500,000 — $162 million

» Increase corporate income tax rate from 7 to 8 percent — $110 million

» Raise titling tax on cars and trucks from 5 to 6 percent — $166 million

» Index gasoline tax to cost of construction each year — $66 million first year

» Freeze some Thornton education funding for two years — saves net $208 million

Tax cuts

» Reduce property tax 3 cents per $100 of assessment ($177 million cut)

» Lower income tax rate by 1 percent on first $15,000-$22,000

» Raise refundable earned income tax credit

» Give $50 sales tax rebate to senior citizens and those earning less than $30,000

» Double senior citizen income tax exemption to $2,000 ($40-$50 cut)