A10
Politics & The Nation taxes from A1
many Marylanders — or that they pay as often — as the sales tax. As a result of the rate increase
passed under O’Malley, consum- ers in Maryland pay about 40 more cents in sales tax for a basic pair of jeans, another $2 for an iPod and another $10 for a typical 46-inch flat-screen TV. Last year, Maryland collected almost $3.8 billion in sales taxes
EZ SU
KLMNO
SUNDAY, SEPTEMBER 26, 2010 Ehrlich vows to roll back sales tax rate if he is reelected governor
— a source of revenue second only to personal income taxes in the state’s operating budget. Legislative analysts say that
cutting the sales tax rate would decrease those collections by $650 million to $700 million a year by the time Ehrlich’s plan would take effect. In an interview, Ehrlich de-
clined to say how much his plan — which he first floated in April — would cost or how he would pay for it.
Ehrlich acknowledged that
the cost of his plan would be “obviously something,” but he said it would be less pricey than some suggest, because the cut would spur additional consump- tion. “I don’t think anyone’s buying
$600million,” he said. Dennis Coates, an economics
professor at the University of Maryland Baltimore County, said the impact of additional con- sumption probably “wouldn’t get
anywhere close” tomaking up for the lost tax revenue.
Details, details For several weeks, Ehrlich has
suggested that he will release more details about the fiscal impact of his campaign promises on the state budget. Butwith just five weeks remaining until Elec- tion Day, he has not done so. Aides have downplayed the
lack of detail, suggesting Ehrlich — whom O’Malley defeated in
2006—has shown before that he knows how to cut the budget. In advocating his plan, the
former governor cited an argu- ment more frequently made by liberal Democrats — that the sales tax hurts the poor, because it consumes a greater share of their income than it does for the wealthy. And Ehrlich said rolling back the rate would boost “busi- ness confidence” inMaryland. Beyond that, it’s unclear how much cutting the tax by 1 per-
centage point would help Mary- land’s economy. Anirban Basu, a leadingMary-
land economist, said he agrees with Ehrlich’s general conten- tion that taxes are too high in Maryland. But Basu said the sales tax reduction that Ehrlich has proposed is unlikely to spur consumers to buy more and should be “pretty low on the priority list.” “Retailers may benefit a bit,
but I suspect the overall impact wouldn’t be significant,” said Basu, chairman and chief execu- tive of Sage Policy Group, an economic consulting group based in Baltimore. “I really don’t think itwill cause people to change theway they buy goods in a significant way.”
Shopping in Delaware On the campaign trail, Ehrlich
BODY CLEANSERS WE’VE RAISED
has sought to highlight business- es hurt by the sales tax increase. Early in the race, he visited an ice cream shop in Cockeysville, where co-owner Whitney Berger told him customers often show up with precise change for their favorite smoothies or sundaes. When the higher sales tax rate
took effect, she said, “we had a sign up for a while. People were flipping out.” More recently, Ehrlich con-
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vened a group of families on the patio of a Dundalk home, where several parents told him how their shopping trips toDelaware, which has no sales tax, became more frequent after Maryland raised its rate. When lawmakers approved
the sales tax increase in 2007, fiscal analysts estimated that it would generate almost $700mil- lion in additional revenue for the state by 2009. The increase was closer to $400million. However, Basu and other
economists suggest that the ma- jority of the shortfall is because of the bad economy rather than the way Marylanders reacted to the tax increase.
Legislative challenge If Ehrlich wins in November,
he is all but certain to confront a General Assembly dominated by Democrats skeptical of his tax- cutting plans. Leading Demo- crats question whether they can afford to give up several hundred million dollars in expected reve- nue given the looming shortfalls. “I think everyonewould like to
do that, but I don’t think it’s practical,” Sen. Edward J. Kase- meyer (D-Baltimore County), acting chairman of the Senate Budget and Taxation Committee, said of Ehrlich’s proposed sales tax cut. Besides the sales tax, lawmak-
ers in 2007 approved increases in income taxes paid by upper earn- ers, as well as increases in the corporate income tax, tobacco tax and titling tax, among others. O’Malley said the decision to
raise taxes and cut the budget that year was intended to “pro- tect our state’s priorities, and the priorities of everyMaryland fam- ily.” “We . . . did ask everyone to
pay an additional penny on what was the 42nd-lowest sales tax in the country,” O’Malley said. “The decisions have not been easy, but they are the tough decisions necessary in order tomoveMary- land forward.” O’Malley was referring to a
ranking by the nonpartisan Tax Foundation.With a sales tax rate of 6 percent, Maryland ranks 33rd nationwide in the group’s survey, which includes sales tax- es imposed at the local level. Ehrlich and Republicans in
the legislature have suggested that the more relevant compari- son is surrounding states. By that measure, Maryland
fares less favorably. The com- bined rate is a little higher in Pennsylvania, the same in the District and West Virginia and one percentage point lower in Virginia. Maryland has been less ag-
gressive than some states over the years in applying its sales tax to services as well as consumer goods. Ehrlich says that is where O’Malley and fellow Democrats will take the state next if he is not elected. At recent campaign stops, Eh-
rlich has distributed a list of 43 services—including tanning, tax preparation and interior deco- rating — that lawmakers consid- ered taxing during the 2007 special session. O’Malley and Democratic leg-
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islative leaders say there is little appetite to revisit that debate.
wagnerj@washpost.com
Home delivery starts your day off right.
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©2010 P&G
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