Senate budget plan includes tax hikes for all, pension shift to counties

By Len Lazarick
Len@MarylandReporter.com

The Senate Budget and Tax Committee on Thursday sent a $35 billion budget to the full Senate that includes income tax increases for almost everyone and $600 million in ongoing spending cuts.

This fiscal 2013 spending plan includes a shift of teacher pension costs to county school boards, along with new requirements for county governments to fund public schools, allowing them to even disregard local property tax caps to do so.

Senate Budget and Taxation Committee Chairman Ed Kasemeyer, D-Howard, called it “a fair and equitable package.”

Senate President Mike Miller issued an unusual news release stating, “To create this package, we worked with our teachers, the counties and other affected groups to come to a package that is as fair as it can be.”

Miller’s release quoted the head of the state teacher’s union supporting the plan, as well as Baltimore County Executive Kevin Kamenetz, the only leader of a major county who was not vehemently opposed to the pension shift.

Complicated mix; some Democrats grumble

The package was a complicated mix of four different bills that included the doomsday budget unveiled Tuesday. Its $720 million in cuts would still be triggered if the senators failed to pass the tax hikes. “We’re asking people to be statesmen,” Miller told reporters earlier in the day.

There was a bit of grumbling from some committee Democrats about aspects of the package, but in the end all 10 Democrats and two of three Republicans voted for the budget, though all three GOP senators opposed the tax hikes.

Only Sen. David Brinkley, R-Frederick, voted against the budget, after losing an attempt to incorporate all the doomsday cuts into the budget plan.

“We still had an opportunity to have the budget grow at 0%,” Brinkley said afterward. Many of the “doomsday” cuts were similar to spending reductions he had proposed in past years.

Income tax hikes for most

As expected, a bill to hike income tax rates by a quarter of a percent offered by Sen. Roger Manno, D-Montgomery, was the vehicle for all the tax hikes. The bill rolls back a 15-year-old tax cut engineered by Gov. Parris Glendening.

After some reworking, taxpayers making less than $75,000 would not pay the full amount, and many lower income workers would get higher tax credits.

Also added to the Manno bill was the governor’s proposed sales tax on Internet sales with some connection to Maryland and a doubling of the tax on cigars and other tobacco products, except for high-priced premium cigars. The committee rejected Gov. Martin O’Malley’s proposed sales tax on digital downloads and purchases of gold coins and bullion.

The tax hikes will raise over $600 million. The tobacco tax, which would be among the nation’s highest for cigars, is designed to pay for more health care and cut the use of small cigars by young people, advocates say.

Sen. Ed DeGrange, D-Anne Arundel, said there were “a lot of things I don’t like” in the tax measure, but “we don’t have a lot of choices…. We do need to balance our budget for today” and into the future.

The committee did a series of small cuts to the governor’s spending as recommended by its subcommittees.

The Maryland Association of Counties prepared a chart comparing the committee actions to O’Malley’s original proposals.