2024-03-15 17:00:00
Democrats in the Maryland House of Delegates launched a $1.2 billion tax, toll and fee increase package Friday certain to hold the state’s budget hostage, escalating intraparty tensions over how to patch huge, mounting deficit projections not seen since the Great Recession.
The multipart proposal, structured to force state senators to haggle, seeks an amendment to the Maryland Constitution that would legalize and tax online poker and other internet gambling.
An array of revenue-generating plans includes a new fee on electric vehicles, a higher tax burden for corporations, sales taxes on used car trade-ins, a new 75-cent fee on ride-share trips and higher tolls for out-of-state drivers, among other measures.
All together, the package aims to raise $525 million annually for a landmark education program that lawmakers passed without sustainable funding attached and an additional $675 million annually for transportation projects, both prized Democratic priorities imperiled in a stagnant economy. As it stands, the education program is projected to run out of enough cash in two years.
And Gov. Wes Moore’s ambitious goals, including to end child poverty, require that the state have money to pay for them.
“We can no longer rely on quick fixes or short-term approaches,” House Speaker Adrienne A. Jones (D-Baltimore County) said Friday, standing with more than a dozen fellow Democrats behind a lectern with a “Let’s Get Moving” sign.
She and other House leaders positioned themselves as the wing of Democrats willing to tackle tough problems to preserve the values the party shares.
“At this point, we know what the solution is, and it’s finally time that we just state: The answer is revenues,” she said.
The maneuver immediately ignited a simmering election-year political fight among the typically united Democrats, who have held majorities in both chambers of the Maryland State House for generations.
“I don’t think there’s much room for compromise. And frankly, this is what we’ve been saying for months,” Senate President Bill Ferguson (D-Baltimore City) said immediately after the proposal was unveiled.
While Democratic senators have advanced their own plans to raise tolls on out-of-state drivers and charge an annual fee of up to $150 to electric vehicle owners, who don’t pay the gasoline tax that normally funds transportation projects, the chamber and Moore (D) have resisted across-the-board revenue hikes right now.
Moore argues he has a “very high bar” for imposing tax increases, given Maryland’s high cost of living and his preference to attempt to turn around the economy first.
House leaders say there’s no time to wait.
“We are facing a high bar. We are facing shortfalls in our Transportation Trust Fund that are not sustainable. So we believe we’ve met the high bar,” House Appropriations Chair Ben Barnes (D-Prince George’s) said.
Moore’s transportation secretary, Paul J. Wiedefeld, said in an interview the proposed influx of transportation dollars would allow the government to “bring back the things we had to cut,” and that the state cannot compete for federal transit money if it can’t demonstrate it has the money to maintain its existing system.
“It really does start to position us for some of these megaprojects, particularly the Red Line,” he said.
Senate leaders, however, want to first build a case to the public for tax hikes.
“That difference of opinion will play out,” Ferguson said. “Marylanders are concerned about inflation and costs for their daily budgets, and we have to be extremely mindful of that in this political environment.”
Tax talk has already given fodder to Republican Larry Hogan’s campaign for the U.S. Senate. Twice this week, the former governor sent emails using the “crazy” tax debate to solicit support, deploying the same pocketbook-issues playbook that helped him win two terms in a deeply blue state that elected Joe Biden by a 33 percentage-point margin in 2020.
While Marylanders are struggling with price hikes and inflation, the last thing they need is more taxes and fees.
When I was Governor, we showed how to balance the budget while lessening the load for taxpayers. I urge Maryland’s leaders to abandon this tax crusade and return to…
— Governor Larry Hogan (@GovLarryHogan) March 15, 2024
By using the budget process to advance the revenue increases, House Democrats will force tax negotiations with Senate because the state constitution requires the Maryland General Assembly to pass a balanced budget before it adjourns April 8
The tax fight in Annapolis centers less on whether to raise taxes than when.
Declining gas tax revenue and rising construction costs helped blow a $3.3 billion hole in the state’s transportation budget, forcing Moore to cut projects and scale back services across the state. He has vowed to build the Red Line transit project in Baltimore and has an aging American Legion Bridge over the Potomac River to replace.
At the same time, Democrats’ signature education program needs billions of dollars in annual revenue to keep going. Known as the Blueprint for Maryland’s Future, the initiative is supposed to send hundreds of millions of dollars a year to schools in high-poverty neighborhoods to provide an array of wraparound services. It also aims to raise teacher pay statewide, provides preschool starting at age 3 and pays for tutors and apprenticeships.
The Maryland Senate’s version of the state’s $63 billion budget is expected get final passage Friday. It closes budget gaps by shuffling around savings and adopting some of the expenditure trims that Moore suggested in his spending plan. Among those: multimillion-dollar cuts to community colleges, private four-year institutions, maintenance of state parks local governments’ road-building projects.
“My preference is to get through this year and continue to work on options for future years,” Senate Budget Chair Guy Guzzone (D-Howard) told reporters earlier this week. All Democratic leaders care about the bills they passed on education, transportation and climate change, but there needs to be a sustained public sales pitch first, he said.
“Whenever we ask the public to give up their hard-earned dollars for something, we better do a good job of convincing everyone that what it is we’re doing is that important,” Guzzone said. “And so for me, a lot of this is a process, where we’ve got to really work hard as a group — and I mean, the governor, the House, the Senate, we’ve got to work together because we do believe in these things.”
The magnitude of the tax package rivals the one Democrats passed during a 2007 special session called by then-Gov. Martin O’Malley (D). That ultimately enacted $1.4 billion in tax increases and put a referendum on slots on the ballot.
Republicans have been rallying against tax increases, with the Maryland state GOP sending out weekly emails including one last week that accused Democrats of pitching “the biggest tax increase in state history” by proposing to apply sales tax to services, which are currently exempt. That sales tax proposal is not advancing, but Republicans scheduled a Friday rally against the internet gaming piece, arguing it would cost casino workers their jobs.
House Democrats argue the choice is between keeping the state’s education system intact or reneging on the promise that all children will get an equally good education.
“We would essentially be picking winners and losers in terms of a child’s education, depending on their Zip code,” said House Ways and Means Chair Vanessa Atterbeary (D-Howard). “As a mother and as a legislator, I cannot turn my back on that commitment. Neither can Madam Speaker. Neither can … all of my colleagues.”
Katie Shepherd contributed to this report.
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