For two years, advocates for people with developmental disabilities — and some of the disabled themselves, many in wheelchairs — begged the legislature to pass a higher alcohol tax to increase funding for the thousands of people waiting to get state services. They held town meetings for lawmakers, they demonstrated at the State House, they even conducting a brief sit-in.
“Ten cents makes sense,” they chanted, saying the higher taxes amounted a dime a drink.
Earlier this year, the legislature did pass a new, but very different alcohol tax, adding an additional 3% retail sales tax to the beer, wine and spirits that are also taxed at the wholesale level. But in typical fashion, to get the votes for the new tax, the developmentally disabled were given $15 million of the $80 million the tax was supposed to raise. The rest of the money was spread around to various jurisdictions for school construction and other programs.
The advocates were at least happy to get a fifth of a loaf, and many hoped more money would flow to the developmentally disabled in future years.
Then sometime this summer, just as the higher taxes were kicking in, officials at the Department of Health and Mental Hygiene discovered that the Developmental Disabilities Administration had not spent $38 million of their budget in the last years, $25 million in state dollars. Bookkeeping maneuvers had hidden the unspent cash, but once higher ups discovered it, the money had to be returned to the general fund.
We broke this story on MarylandReporter.com on Nov. 9.
Thousands Wait for Care
Caregivers and advocates were outraged, furious at the agency’s failure to spend money when 6,000 people were waiting for services, more than a hundred of them in crisis mode.
The state is already facing another tight budget year and Gov. Martin O’Malley could restore the surplus funds, but he doesn’t have to.
The state spends $831 million a year to care for about 21,000 citizens with developmental disabilities, many with Down syndrome and autism. Most are adults; some can only speak with the aid of a computer, and many require 24/7 care to do routine things like eat, dress and go the bathroom. Their caregivers, usually dedicated parents, grow weary and need help. Without round-the-clock care, many of them would die. The professional caregivers, who generally work for nonprofit agencies like The Arc, make only $10 an hour.
Despite the low wages, 24/7 care is expensive, averaging $40,000 per person. Who but state taxpayers and their relatives would take care of these folks?
Yet, the next time someone proposes a special tax to provide for the neediest among us, we would be stupid not to ask: Do you really need the money?
Taxes for Jobs
A Blue Ribbon Commission studying transportation funding said, yes, indeed, the state does need the money, an infusion of $870 million to the transportation trust fund.
They’ve proposed a 15-cent a gallon hike in the gasoline tax, which hasn’t been raised since 1992. But that would boost the tax to 38.5 cents a gallon, fourth highest in the nation. The commission proposed higher vehicle and registration fees as well.
The governor and legislative leaders see the new taxes as a way to boost jobs in the hard-hit construction industry, but are struggling to find the votes and the money to do it.
The state could accelerate its bond offerings (essentially maxing out its credit card and reducing what the state could spend in future years). The legislature could also pass “revenue enhancement” (tax hikes) and almost any would do. The state could find more public-private partnerships to finance projects, and the government could stop using bond debt to replace special funds for open space, highways and bay restoration.
If there are going to be “revenue enhancements,” House Speaker Michael Busch said they need to be tied to projects citizens can see, like a road, a bridge, a school. “They want to know that there’s a direct result” from paying more.
Despite the desire to spend more on needed projects, the Maryland budget still has a lingering structural deficit of about $1 billion — promised spending that exceeds expected revenues.
Job Numbers Are Speculative
Busch pressed Warren Deschenaux, the legislature’s fiscal chief, for how many jobs additional spending might create.
“We don’t know,” Deschenaux said. It depends on the type of construction, since much of the money is spent on material and not labor.
“There’s a lot of fanciful conversations that take place around this,” Deschenaux said. “I won’t vouch for any number.”
Busch fell back on a figure that $1 billion in construction spending would generate 15,000 jobs; if that were matched by local government spending on schools and roads, it could amount to 30,000 jobs.
It is also unclear how quickly the state will be able to ratchet up capital spending, since agencies were told two years ago to expect less bond debt would be floated to finance projects.
Some of the projects most likely to be “shovel ready” involve school construction. Local school systems have $395 million in projects they want funded, in addition to the $250 million the state plans to spend every year.
There are also $100 million in deferred maintenance projects on state office buildings and a $1.6 billion backlog in maintenance in the university system. Analysts said there are small- to mid-sized transportation projects that could be implemented quickly.
Kasemeyer Favors Lower Corporate Taxes
Senate Budget and Taxation Committee Chairman Ed Kasemeyer told a Howard County Chamber of Commerce breakfast last month that he personally favored rolling back Maryland’s corporate income tax by 1/4% a year for several years.
This would bring Maryland’s 8.25% corporate tax rate, which was raised four years ago from 7%, closer to Virginia’s 6% rate.
Afterward Kasemeyer emphasized that this was his personal position based on conversations with some members of his committee and not an official Senate stand, since he had not discussed it with Senate President Mike Miller.
Kasemeyer, a Howard County Democrat, volunteered the proposal responding to questions about business tax incentives in Maryland.
Earlier this year, he expressed support for widening the sales tax to other services. But at the breakfast, he emphasized he was opposed to repeated proposals to establish corporate taxation based on a method known as “combined reporting,” noting the opposition of a commission that studied the proposal.
“We’re not going to pass it in the Senate,” Kasemeyer flatly declared.
Commission Rejected Combined Reporting
The Business Reform Tax Commission, created in 2007, spent two years studying different ways to fairly assess corporate taxes. A year ago, the commission voted overwhelmingly against recommending combined reporting to the General Assembly.
According to studies done by the comptroller’s office, if combined reporting had been instituted in 2006, the state would have made $100 million more in corporate taxes. However, with combined reporting in 2008, the state would have seen between $13 million and $51 million less in revenues. According to the fiscal and policy note included with the bill, the state could make $32 million more in corporate income taxes in 2012.
Combined reporting is a complicated method of calculating corporate taxes based on a single fraction for a group of corporations rather than each corporation calculating its own fraction of income that is deemed related to Maryland. It would shift businesses’ tax liabilities because of the new way income would be measured.
Some businesses based in Maryland and elsewhere would pay less; some would pay more.
It was those kind of figures that persuaded Del. Guy Guzzone, speaking at the same breakfast, to say he no longer supported combined reporting, despite having voted for it in 2007.
