How to Avoid the Doomsday Budget

Legislative leaders have developed a “Doomsday Budget” proposal, illustrating the deep cuts needed to balance Maryland’s budget with a “cuts only” strategy. The cuts would hit local schools, access to healthcare, college affordability, local governments and many other important public needs.
 

To avoid these doomsday cuts, the legislature will need to approve some sort of general fund revenue package. Here are some of the revenue measures that are now under consideration by the legislature:

Revenue Options Currently Under Discussion
			Revenue Generated
			($ millions) *
Revenue Option	House Bill (sponsor)	Senate Bill (sponsor)	FY 2013	FY 2014
High-income exemption phase-out	87 (Administration)	152 (Administration)	$67	$46
High-income deduction limit	“	“	$129	$83
Sales Tax - Remote sellers	“	“	$20	$20
Sales Tax - digital downloads	“	“	$6	$6
Cigar and other tobacco tax	“	“	$19	$18
Corporation income tax reform - Combined reporting	941 (Ross)	269 (Pinsky)	$42	$153
Cigarette Tax **	1153 (Luedtke)	526 (Forehand)	$93	$81
Tax on Income over $1 million	784 (Ivey)	249 (Jones-Rodwell)	$146	$111
Repeal 1997 rate cut	508 (Healey)	523 (Manno)	$528	$375
* Many revenue measures will have different revenue yields in the first fiscal year due to timing effects. The FY 2014 estimate is a better measure of ongoing revenue effects.
** Estimate reflects 2011 fiscal note for FY 12 and 13.

This list is not exhaustive of all the general fund revenue measures now before the general assembly, but these seem to be some of the most-talked-about. There are also revenue measures related to gasoline, water bills, and energy bills that are not general funds, but which would be dedicated to particular purposes.
 

To avoid Doomsday budget cuts, the legislature must craft a revenue package. We expect they will consider a combination of two or more of these proposals, or some close variants.
 

In designing the package, they should look for:  

• Adequacy – the revenue package needs to be large enough to balance the budget without damaging budget cuts
• Equity – the new taxes should not be overly burdensome to low-income and working Marylanders. The state can expand the earned income tax credit to reduce the impact on these families. The Senate Budget and Taxation Committee recommended a 5 percent increase in the refundable earned income tax credit.
• Sustainability – the revenue package should help the state reduce its structural revenue shortfall in the coming years

See our latest fact sheet (A Host of Revenue Options Available to Avoid Doomsday Budget) for a more in-depth discussion of these revenue options.