Just Say NO! to Tax Increases in Maryland

Elected officials at the state and federal level have two choices to balance budgets, spending cuts and/or tax increases.  Maryland is no different as it faces a $1 billion debt and debates next year’s budget.  Maryland Governor Martin O’Malley has talked about a number of tax increases to cover the shortfall including gas, tobacco, and alcohol.  It is irresponsible for any state legislator or Governor to advocate for any tax increases.  The only responsible way to balance any budget is through spending cuts.  Tax increases excuse and encourage continued irresponsible spending by the state and weaken an already frail economy.  Even state officials agree with avoiding tax increases.  According to WMAL “Maryland Comptroller Peter Franchot tells WMAL.com that the legislature’s ‘focus [is on] on the state budget.  They’re not focused on the Maryland economy.  The Maryland economy is in a very weak form of recovery.’  Franchot says to raise taxes now would damage the state’s economic recovery. ‘My advice as chief fiscal officer is for them to not raise taxes.  We’re spending too much.  We’re taxing too much.  We’re borrowing too much.  My goodness, we’re almost over whatever maximum limits we had on borrowing,’ he said.”

Governor O’Malley’s proposal to raise gas taxes could add more than 20 cents to the cost of a gallon of gas.  This tax is probably the most irresponsible of them all because gas taxes disproportionately hurt lower and middle class folks the most.  Considering that gas is already at more than $4.00 per gallon, any increase in gasoline taxes could be devastating. 

Maryland legislators will soon consider legislation that will raise the tax on cigars from 15 percent to 70 percent.  Proponents of raising tobacco taxes believe that such a move could raise millions of dollars, but history has shown that proposition to be Fool’s Gold.  An increase in the cigar tax would hurt small retailers and not provide the needed revenue. Past experiences have shown that raising excise taxes does not produce projected revenue. 

Alcohol taxes have long been a target for states.  According to a January 9, 2012 article in the Washington Post, “Last year, [Maryland] lawmakers approved $250 million for school construction during the current fiscal year under the state’s capital program. An additional $47.5 million was earmarked from an increase in the state’s sales tax on alcohol.”  Maryland’s new motto might be, “Drink More Booze for the Kids.”

Not a statewide tax, but Montgomery County, Maryland ushered in its new 5 cent bag tax on January 1, 2012.  The goal is to change consumer behavior and raise money for the county.  Montgomery County follows the neighboring District of Columbia who instituted a bag tax in 2010 in trying to squeeze more money out of an already tax-weary public.  D.C.’s experience has been a complete failure.  According to a report by Americans for Tax Reform and the Beacon Hill Institute, “the bag tax will result in the elimination of more than 100 local jobs and precipitate a $5.64 million decline in aggregate disposable income for 2011. The majority of this income would have been spent in the District and, as a result of the bag tax, D.C. will now needlessly forgo an additional $108,340 in sales tax revenue and will see investment drop by $602,000, with the bulk of the loss occurring in the retail sector.”  The obvious scenario is that people will shift their purchasing behavior to patronize stores that are outside the geographical area of the tax.

These taxes don’t just appear overnight.  There is a deliberate process by elected and non-elected officials to pass these taxes one by one.  Federal, state, and local government budgets should be balanced by cutting spending and increasing the tax base by cutting taxes rather than raising taxes.