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Senator Paul G. Pinsky ... your Annapolis Advocate

...Your Annapolis Advocate

            The Maryland General Assembly convened for a three week Special Session to address Maryland's severe structural budget deficit which has lingered for a number of years. There was no time to waste; the legislature had to meet this fall to resolve this issue in order to save state funded health, education, and environmental programs from peril. Maryland needed to raise revenue to balance the state books just like any family. The Governor proposed a solution, some of which I supported, and some of which I opposed.   
 
            Legalizing slot machines was one of Governor O'Malley's proposals, a policy which I opposed. Bills calling for slot machines and sending the issue to public referendum were passed; However I voted against both bills because of my philosophical opposition to slots. I believe this is bad public policy and a dangerous way to balance the state’s budget. Many studies show that gambling equates to a tax on the poor and I will continue to encourage voters to oppose the legalization of gambling when it comes for a vote next November. The plan also puts a great deal of money in the hands of a couple of track owners and a few business owners.
 
            Overall, I was extremely dissatisfied with the revenue package (raising taxes) but because of the structural deficit, I voted for the legislation. The package included raising the sales tax from 5-6% effective January 3, 2008, restructuring the personal income tax with higher rates than the current 4.75% at higher income levels (see chart below) effective January 1, 2008. 
 

Single, Dependent Filer,
Married Filing Separate
Joint, Head of Household, Widower
Rate
MD Taxable Income
Rate
MD Taxable Income
2.00%
$1 - $1,000
2.00%
$1 - $1,000
3.00%
$1,001 - $2,000
3.00%
$1,001 - $2,000
4.00%
$2,001 - $3,000
4.00%
$2,001 - $3,000
4.75%
$3,001 - $150,000
4.75%
$3,001 - $200,000
5.00%
$150,001 - $300,000
5.00%
$200,001 - $350,000
5.25%
$300,001 - $500,000
5.25%
$350,001 - $500,000
5.50%
Excess of $500,000
5.50%
Excess of $500,000
                                                                                    urce: Department of Legislative Services, Office of Policy Analysis, November 19, 2007

            The package also raised the corporate income tax from 7 to 8.25%, tobacco tax from $1 to $2 per pack of cigarettes, and vehicle excise tax from 5 to 6% beginning January 1, 2008. In total, the revenue package will raise $1.3 billion in taxes and cut close to $550 million to balance Maryland's budget.
 
            Historically, the sales tax only affected goods. With this revenue package, the first service will be added to the sales tax. Computer services will be taxed beginning fiscal year 2009 and ending June 30, 2013. This will primarily fall on business to business operations. The revenue package also put aside $50 million to clean up the Chesapeake Bay and take steps to expand health insurance coverage.  Funds were also set aside to resolve the Prince George's County Hospital situation pending a concrete solution between the county and the state.    
 
            Late in negotiations, I, along with a number of colleagues, was able to reduce cuts to K-12 education and higher education and we were able to return approximately $100 million per year to state education funding for each of the next two years. 
 
            The revenue package that was ultimately passed was much weaker than Governor O'Malley's original proposal. I lobbied for a more progressive package and would have hoped for a tax package which would fall more heavily on those people with a higher income and those businesses that are more able to afford the tax burden and on the businesses that are currently avoiding paying corporate income tax. I have championed efforts to pass a combined reporting law, which would have required all corporations to pay their share of taxes in Maryland. Many of the largest multi-state/multi-national companies are able to avoid paying corporate taxes by sheltering their profits in other states costing Maryland millions of dollars each year in revenue.  Forcing Maryland's smaller businesses to pay the larger tax while larger companies can avoid paying corporate taxes is inequitable. 
 
            For more detailed information about the five bills passed during the 2007 Special Session, please visit: http://mlis.state.md.us/Other/Fiscal_Briefings_and_Reports/SummaryAdminProposalsAsAmended.pdf.
 
            The results of the recent Special Session are disappointing, yet I had no other choice but to vote for the budget bill due to the gravity of the state's fiscal situation.  I have appreciated hearing from you about the issues that matter to you most and encourage you to contact me in the future regarding this or any other issue of interest.
 
Sincerely,
  Paul
...Your Annapolis Advocate
 

 

 

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