At start of session, Governor signals a balanced approach to balancing the budget

Governor O’Malley signaled his intention to adopt a balanced approach to balancing the budget this morning at the annual Annapolis Summit hosted by the Marc Steiner Show and the Baltimore Business Journal.  In addition to supporting raising the gas tax and flush tax, he indicated his support for raising the sales tax by one percentage point as his preferred solution to the structural deficit in the state’s operating budget. His comments are a good indication of what his budget will include, but we still have to wait until next Wednesday for the complete package.

After years of job-killing cuts, the Governor’s sales tax proposal is a good way to begin a conversation about rebalancing the budget.  The legislature can improve on it. A sales tax increase will have a disproportionately negative effect on lower income families. This is because low-income and working families need to spend a larger share of their incomes on taxable goods compared with more affluent households. Increases in gas taxes and the “flush tax” to help Bay water quality will also hit low-income and working families the hardest. These increases should be paired with increased refundable tax credits for low and moderate income earners.

Unfortunately, increasing the sales tax will not be sufficient to protect the vital services that Marylanders depend on and that this state needs to prosper into the future.  The legislature and the governor need to also look at developing other new revenues sources, including closing loopholes for multi-state corporations, reinstating the millionaire’s tax, and modernizing the sales tax to include services.

Happy session!