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Special session

Ulman: Tax hikes are mixed bag for Howard

Howard County Times

Nate Sandstrom

November 21, 2007

The results of the recently adjourned General Assembly special session won't be great for Howard County's budget coffers, though the results might have been worse, County Executive Kenneth Ulman said this week.

Ulman believes the county will lose at least $10 million in state aid in the upcoming fiscal year, compared to what it might have received without several tax code changes the assembly enacted during the special session.

"I have mixed feelings," Ulman said of the session, which ended Nov. 19. "Ten to $12 million will have a real impact on our local budget, particularly education, but it could have been a lot worse."

The biggest hit from the legislature's package will come in the form of a $7.3 million loss in the coming fiscal year in annual state-mandated education funding.

Also, an increase in the annual tax deduction available to some earners could cost the county about $1.5 million in the current fiscal year, Ulman said, adding that he is working with department heads to look for ways to absorb the expected loss.

The deduction is expected to cost the county about $2.9 million in local income taxes annually, Ulman said.

Potential slots revenue

Even worse news could come for the county in January, as the legislature has recommended that Gov. Martin O'Malley find $550 million in additional non-specified cuts, some of which could be in state aid to counties, Ulman said.

However, the county also has the potential to gain more than $2 million a year if slot machines are allowed at Laurel Park race track.

The assembly passed a bill that allows voters to decide in the November 2008 general election if Maryland should legalize the use of 15,000 slot machines at five locations, including Laurel Park, which is in Anne Arundel County on the Howard-Prince George's County border.

Also, Howard might earn more in transfer taxes paid by businesses under a new provision supporters said is designed to close a tax loophole, Ulman said.

Despite the losses in state aid, the results are not as bad as they might have been, Ulman said, adding that Howard County would have lost nearly $40 million in state aid under a proposed "Doomsday" budget legislative leaders released in July that contained no tax hikes.

Split viewpoint

Meanwhile, Howard's state legislators returned from Annapolis this week with opinions on the value of the special session that mostly followed party lines.

O'Malley, a Democrat, called the session Oct. 29 to address a projected $1.7 billion shortfall in Maryland's budget for the coming fiscal year.

During the session, the Democrat-led assembly approved a package of tax increases expected to raise $1.3 billion annually in new revenue. It also reduced the amount of annual increases in mandated education funding and recommended O'Malley make $550 million in additional cuts when he submits his budget for the coming fiscal year in January.

It also approved the bills to allow voters to decide on the legality of slot machines, the use of which O'Malley projects could generate more than $650 million annually.

Republican lawmakers said the session was used to push through unpopular tax increases without allowing the bills adequate public scrutiny. The hikes also will enable runaway state spending, GOP lawmakers said.

"It was the worst example of government that I've ever seen," said Senate Minority Whip Allan Kittleman, of West Friendship.

Del. Warren Miller, a Woodbine Republican, also said he believed the session mostly excluded public input.

"The taxpayers were fleeced in less than three weeks," he said, adding that the assembly's decision to have the hikes take effect Jan. 1 compounded problems for taxpayers.

"I think it's very offensive that these tax increases are going in right as people are trying to pay their Christmas bills," Miller said.

Addressing the shortfall

Several Howard Democrats said they did not favor some of the hikes the assembly approved, but that the tax package addresses the pending budget deficit.

"If you control your spending, you've got a long-term solution," said Del. Frank Turner, a Columbia Democrat.

Senate Majority Leader Edward Kasemeyer, of Columbia, countered Republican criticisms about the process by which the assembly passed the tax bills, pointing out that the legislature had considered many of the hikes in previous years.

In addition, legislative leaders worked to limit the impact of the hikes on middle-income families, Kasemeyer said. He cited an analysis done by The Sun this week that showed that a family of four with no smokers and an annual income of $100,000 would pay $55 more annually in taxes under the hikes.

"It's easy to feed into the criticism, but I feel we did what we needed to," he said. "For the average family to pay $55 more a year, I think that's a reasonable outcome."