O'Malley: Raise taxes to invest in roads, schools

By Brian Witte

Associated Press

Published: Wednesday, Feb. 1 2012 2:35 p.m. MST

Maryland Governor Martin O'Malley delivers his State of the State speech Wednesday, Feb. 1, 2012 in Annapolis, Md. O'Malley urged lawmakers to invest in the future to spur job growth.

Steve Ruark, Associated Press

ANNAPOLIS, Md. — Gov. Martin O'Malley on Wednesday urged lawmakers in his State of the State speech to make difficult decisions to raise taxes in order to spur job growth through investments in schools, roads, bridges and wastewater treatment improvements.

O'Malley, a Democrat in his second term, said Maryland is moving out of the recession, although the state still has not recovered all the jobs that were lost.

"We cannot kid ourselves into thinking that by failing to invest in our future we are somehow saving resources — that we are somehow being clever in saving money, for everything has a cost," O'Malley said. "Failing to make decisions that are consistent with the best interests of the next generation, this too has a cost."

O'Malley has proposed an ambitious budget plan for the current legislative session. For example, the capital budget, which is used to pay for state infrastructure, increases state borrowing to $3.6 billion to pay for projects that could create more than 51,000 jobs.

He also is pushing for a variety of tax increases, proposals that have brought strong criticism from the state's Republican lawmakers.

One would levy a 6 percent sales tax on gasoline, phasing it in by 2 percentage points a year. Another would double the state's "flush tax," a $30 annual tax on sewer bills. The governor's budget also would raise taxes on cigars and smokeless tobacco from 15 percent of wholesale to 66 percent. O'Malley also wants to require online sellers such as Amazon to begin collecting sales taxes that are owed on such purchases.

Sen. E.J. Pipkin, R-Cecil, said he disagreed with O'Malley's take.

"The state of this state is that it is heavily taxed, and those taxes are job killers," Pipkin, who is Senate minority leader, said in the GOP's response to O'Malley's speech.

Pipkin and other Republicans contend this is the worst time to raise taxes, with the state trying to recover from a recession. Republicans also say O'Malley actually is hurting the middle class, despite the governor's stated goal of expanding it.

"The governor has raised taxes and fees and tolls," Pipkin said. "He ignores the fact that people are still struggling to keep their heads above water in these economic times."

But O'Malley emphasized that the state can't fall too far behind in maintaining infrastructure crucial to economic development.

"To create jobs, a modern economy requires modern investments," O'Malley said. "Investments by all of us, for all of us."

O'Malley also mentioned his proposal to shift a significant portion of teacher pension costs to the counties.

"We will partially fund this education cost, along with other priorities, by capping income tax deductions and phasing out some exemptions for the 20 percent of us who earn more than others," O'Malley said.

House Speaker Michael Busch, D-Anne Arundel, described the governor's speech as well-received by his chamber, which is divided on some of his priorities, especially legalizing same-sex marriage. He also noted the difficulty of raising taxes.

"The issue is, 'Who's going to have the political will to come up with a solution to that political problem?' I don't think there's anybody out there who wants to see their education money cut to their county or wants to see tuition go up, so if you're not going to do those things, you have to make some tough decisions," Busch said.

The governor said he understands that Maryland residents are still feeling the effects of the recession, but he said necessary investments won't be made by anyone else.

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