ANNAPOLIS – Gov. Robert Ehrlich relaxed his stance on taxes Wednesday and met with General Assembly leaders to negotiate a solution to the $500 million gap in his budget.
Ehrlich said, “Slots, cuts, and taxes, if any,” were the budget measures he discussed with Senate President Thomas V. Mike Miller Jr., D-Calvert, and House Speaker Michael Busch, D-Anne Arundel, in between luncheon speeches.
While Ehrlich continued to hold the line against increases in sales and income taxes, his spokeswoman said two other formerly taboo taxes are under discussion: alcohol and tobacco.
“It’s something the governor certainly would not prefer,” spokeswoman Shareese DeLeaver said Wednesday, “But I can’t say for certain it would be vetoed.”
Any so-called sin taxes were dead on arrival in January and February, spokesmen said at the time.
Slots revenue, expected to be $395 million in January, won’t come through in 2004, lawmakers said this week. The Board of Revenue Estimates also dropped $112 million from the state’s expected tax take, making the situation even worse.
“There is a lot of common ground on cuts, a lot of momentum on slots, it’s the third group (tax increases), that we have to work on,” Ehrlich said.
Property tax increases are emerging as a possible compromise.
Lawmakers would cut $100 million in debt payments out of the General Fund and ask the Board of Public Works to raise the property tax to make up the same dollars at a later date.
Although Ehrlich said it is “inaccurate” to say he’s actually proposed the property tax plan, Miller said he has.
“That could work,” said Senate Budget and Taxation Chairman Ulysses Currie, D-Prince George’s.
Businesses will also face levies, Ehrlich warned, saying loophole closings might not be the best route, but his administration would consider some proposals that businesses would not appreciate.
The House plan calls for something Ehrlich has eschewed – a $300 million income tax increase on residents earning more than $200,000 a year.
“We have options, we have things we can do,” said Michael R. Gordon, chairman of the Tax and Revenue Subcommittee of the House Ways and Means Committee.
“The penny sales tax increase is dying like a grape on a vine,” Gordon said of an earlier budget-balancing proposal.
With the income tax facing Ehrlich’s veto pledge, the Senate leadership is instead looking to alcohol and tobacco levies, Currie said, and maybe some of the corporate taxes or loophole closing.
House and Senate lawmakers are trying to avoid further program cuts to close the remaining gap, since Ehrlich cut $440 million in the budget he introduced Jan. 17, and the Senate is aiming to cut an additional $300 million.
“We’re getting close to the limit on cuts. We’re looking at the bone,” Currie said.
Republicans are balking at talk of new taxes.
“Some of the things will be tough for our caucus members to support,” said Senate Minority Leader J. Lowell Stoltzfus, R-Somerset, even proposals fellow Republican Ehrlich might back.
The House GOP doesn’t want to entertain any revenue increases beyond slots, said Minority Leader Alfred Redmer, R-Baltimore County. “The consensus of the Republican Caucus is that we should pass a slots bill and take care of the rest of it with cuts.” After his meeting with Busch and Miller, Ehrlich told Allegany County leaders that winning fierce election campaigns is easy compared to the give and take required to govern.
He called the leadership meeting a success and “asked for them to come back to me with some concrete proposals.”
The three leaders must agree on new measures and then use their weight in their respective organizations to pass the legislation by March 30, the last day to present a balanced budget.
“I have the easy part,” Ehrlich said, “it’s just me.”