ANNAPOLIS – A Senate committee overhauled the House’s budget Tuesday, substituting slots, a tobacco tax hike and a one-year corporate income tax surcharge for the lower chamber’s raid on the Rainy Day Fund and business taxes and fees.
The new plan also restores $40 million in House cuts from higher education, but fails to leave any surplus funds to cover expected revenue shortages, as the House did.
Two controversial provisions — mandatory slot machine revenues and a 5- cent property tax hike — may keep the budget from getting through even its own chamber.
“I’m worried about the votes,” said Senate President Thomas V. Mike Miller Jr., D-Calvert. “We have 11 senators who pledged not to support taxes, and the Republicans don’t want this . . . I have to get 24 votes out of 29. That is not going to be easy.”
Each revenue measure will have to be split from the package and approved separately in order to pass, Miller said, but he’ll wait until he has the votes for the entire budget before bringing the plan to the whole Senate later this week.
Once the Senate approves its budget, a committee of House and Senate leaders will smooth the differences and present a final budget to both their bodies for approval, then pass it on to Gov. Robert Ehrlich for authorization.
“Don’t make any plans for April 8th or April 9th or . . . ” said Sen. Patrick J. Hogan, D-Montgomery, warning the budget sets up a stalemate with House leaders already committed to fighting slots.
Even with slot machine revenue – expected to raise about $15 million next year – the budget didn’t go far enough to please many lawmakers fearing billions in deficits over the next three years.
“I don’t think we made the necessary provisions for our financial situation,” said Sen. Edward Kasemeyer, D-Howard.
The Senate Budget and Taxation Committee did follow much of the House’s plan, including a proposal to tax health maintenance organization plan premiums at the same 2 percent rate other insurance agencies are charged.
Lowering the House-approved corporate filing fees and throwing out the loopholes required the committee to pass new revenue plans many consider unwise, including eliminating the commercial Heritage Tax Credit, tripling the tax on non-cigarette tobacco products and hiking the corporate income tax 10 percent for one year.
Many legislators said they believe the budget is insufficient and that greater tax hikes are necessary, especially if the state wants to avoid ruining a promise to greatly increase funding to public schools.
“It’s closer to a 0 percent chance of funding (the mandated education increase),” Miller said, than the possibility of delaying or limiting the state’s contribution to education.
“We’re going to need something else,” said Budget and Taxation Committee Chairman Ulysses Currie, D-Prince George’s.
Other revenue ideas – adding a penny to the state’s 5-cent sales tax and increasing income taxes on residents who make more than $200,000 a year – will be held in committee, Currie said. The move will provide other options to fund education reforms if they’re needed, he said.
He praised the committee’s effort to restore $100 million to the Rainy Day Fund and $40 million to the higher education budget.
Everyone has something they don’t like in the budget, Miller said, pointing to his own disapproval of the $16 million from higher levies on cigars, chewing tobacco and other non-cigarette tobacco products.
It didn’t take long for word of the tobacco levy to waft down Maryland Avenue from the State House to The Smoke Shop, where manager Chris Simmons harped against the measure that would triple the tax from 15 percent to 45 percent.
“It would basically put small tobacco out of business across the state,” he said.
Earlier in the day, House Republicans gathered on Lawyer’s Mall to express their hatred of proposed corporate tax hikes, saying the fee increases and tax on HMOs showed “absolute disregard,” for the importance of business during a recession, said Minority Leader Al Redmer Jr., R-Baltimore County. After hearing of the Republicans’ protest, Miller said, “There’s a different breed of cat in Annapolis this year.” – 30 – CNS-3-25-03