Tuesday, September 28, 2010

Washington Post: First Click Maryland - A review of two records on revenues by John Wagner

First Click: A review of two records on revenues

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Monday, Sept. 27, 2010:

The Agenda

Even the casual observer of the Maryland governor's race has no doubt heard Gov. Martin O'Malley (D) knock his Republican predecessor for "jacking up taxes and fees by $3 billion." It's a common line on the stump and in campaign ads.

The number is based on an analysis by Maryland's nonpartisan Department of Legislative Services of revenue increases that took place during former governor Robert L. Ehrlich's four-year tenure. The figure -- actually $2.9 million -- requires some explanation, and it is unfair to pin the full total on Ehrlich (R). But more on that in a moment.

Thumbnail image for O'Malley bill signing.jpg

A newer DLS analysis is now circulating that provides close to an apples-to-apples comparison of revenue increases during O'Malley's four years. That figure: $3.6 billion (a higher number than the Ehrlich era but lower than some, including the Ehrlich campaign in a recent Web ad, have suggested).

In the final five weeks of the campaign, voters are certain to be treated to cacophony of numerical claims from both sides, some more firmly rooted in reality than others. The DLS numbers are probably as objective as we're going to get, so they seem worth exploring.

First off, the numbers are "cumulative," meaning they are intended to measure the additional revenue that resulted across all four fiscal years that began while Ehrlich and O'Malley were in office.

The state property tax, for example, was raised early in Ehrlich's term, so DLS scores the impact of that tax increase as $170.8 million in fiscal year 2004, $185.1 million in 2005, $205 million in 2006 and $132 million in 2007 -- for a cumulative impact of $692.9 million.

Secondly, it is important to note that the analyses do not take into account how the revenue increases originated.

The Democrat-led legislature, for example, approved an HMO tax during a 2004 special session to subsidize doctors' medical malpractice insurance costs and to enhance Medicaid coverage. Ehrlich vetoed the bill that included the tax, but his veto was overridden by the legislature. Still, nearly $190 million in revenue increases attributable to the HMO tax are included in the analysis during Ehrlich's tenure.

Moreover, the definition of "revenue measures" in the analysis is broader than just tax and fee hikes. The Ehrlich-era total includes his better-known fee increases, including those on vehicle registrations, sewer systems and corporate filings. But Ehrlich's tenure also includes several "tax compliance measures," which are hardly the political sin these days that tax and fee increases have come to be.

The O'Malley-era total includes some revenue related to the state's fledgling slot-machine gambling program and speed cameras initiative.

But the $3.6 billion figure is almost entirely attributable to a 2007 special session in which multiple taxes were raised in an effort to fix the budget, and the imposition of a temporary "millionaires' tax" in 2008.

The 2007 tax measures included an increase in the personal income tax on high-end earners, as well as increases in the sales tax, corporate income tax, tobacco tax and vehicle titling tax.

The four-year impact of the special session is scored at $4.2 billion. O'Malley's overall figure is brought down some by backing out the impact of a tax on computer services, however. Lawmakers passed that tax in 2007 but repealed it in 2008 before it took effect. The four-year impact of the "tech tax" alone would have been $661.5 million, according to the analysis.

Got all that? We can promise it won't be the last time you'll hear some of these numbers between now and Nov. 2.

-- John Wagner

Trust First Click for critical news and analysis you need to navigate Maryland politics each weekday. You can also find First Click onFacebook and Twitter.

By John Wagner | September 27, 2010; 6:45 AM ET Categories: First Click, John Wagner

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