Additional Tax Increases Could Be on the Horizon, Franchot says

Be prepared for a bevy of new tax increase proposals, as Maryland continues to deal with a billion-dollar structural deficit, state Comptroller Peter Franchot told members of the Chesapeake Gateway Chamber of Commerce on Friday.

Franchot told the chamber during its “Legislative Wrap-up” luncheon at in Middle River that he expects tax increases to dominate much of the General Assembly’s special session this fall as the legislature meets to discuss legislative redistricting for the state and federal levels.

The just-completed General Assembly session led to the passage of  $800 million in new taxes and fees, Franchot said, including raising the alcohol sales tax from 6 to 9 percent, increasing the car titling fee from $50 to $100 and doubling land recording fees from $20 to $40.

Franchot said the economy is too fragile as the nation deals with soaring gasoline prices and sinking home values and continued high unemployment for citizens to also deal with the multitude of tax increases passed in Annapolis.

Franchot added while he opposes the tax increases in Maryland, he also is against the other extreme many have proposed in wholesale budget cuts across the board. He believes both approaches are both unsustainable and untenable.

“That is really not practical,” said Franchot on deep budget cuts. “We can’t continue to make investments in education, health care and economic development if we just destroy our budgets.”

The comptroller, who took office in 2007 following the late William Donald Schaefer, said he recommends a compromise approach which consists of trying to run government more efficiently, making smart taxes and exploring tax increases only when the economy has stabilized.

“I do think we need a third way and a different approach,” Franchot said. “I call it do better with less.

“Essentially, I propose that the county and state governments partner with the private sector and develop business and other practices that will allow us to deliver a better education system, a better health care system and a better transportation system using less money because of efficiency and focusing on results and not how much we’re spending on any given result.”

Franchot mentioned three examples currently in use and the local and state levels, which prove that government can be more efficient, save money and provide better services to citizens at the same time.

His first example was within the comptroller’s office, which has led 2 million of Maryland’s 3 million people filing tax returns to do so electronically. This approach, Franchot said, not only is more secure, but also ensures citizens receive their state refunds within 72 hours and also saves the state $2 per return in administrative costs.

Franchot also cited the example of schools systems using a team approach – from administrators and teachers to maintanance workers and parents - working together to help extend the lives of school buildings. This approach saves jurisdictions hundreds of millions of dollars in costs for constructing new schools.

Finally, Franchot pointed to jurisdictions investing more in preventative health care and testing. This approach, he said, can save the state millions in future Medicaid costs.

“Let’s put aside beliefs of whether you’re for taxes or for draconian cuts,” Franchot said. Let’s … develop efficiencies where we can improve the public sector and the delivery system of what people expect and also get rid of this deficit and do more with less.”

At least in Baltimore County, there appears to be frustration similar to Franchot among both Democrats and Republicans for the recently past tax increases and the prospect for additional revenue enhancement proposals.

This was especially true for the alcohol tax, which was opposed by 15 of the county’s 21 state delegates. Baltimore County will receive $7 million for school construction from the first $85 million that the tax is expected to generate.

However, many early supporters of the tax expected a majority of the funds from the tax to go toward helping those with developmental disabilities, not for school construction and to help balance future budgets,  

Among those opposed to the alcohol tax increase were District 8 Del. Eric Bromwell, a Democrat, and District 7 Del. Kathjy Szeliga, a Republican. Both legislators attended the chamber luncheon.

“I’ve grown up in the restaurant business and been a general manager of restaurants,” Bromwell said. “I pleaded with my collegues to change the [July 1] effective date. You don’t know how bad this will be for restaurants, small businesses and liquor stores. It’s not always a Democrat or a Republican thing. There’s just not a lot of small business background in the legislature.”