Truth-tellers, liars and equivocators

Does O'Malley's tune include a lot of tax increases?

September 24, 2010 - 02:11 PM
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O'Malley's March
Maryland Gov. Martin O'Malley performs in 2002 with his band, O'Malley's March. The band has been on hiatus since O'Malley was elected governor.

Maryland Gov. Martin O'Malley's Republican critics have never been shy about mocking the governor for serving as the the lead singer and guitarist of O'Malley's March, a Celtic rock band.

The band has slowed down since their frontman ascended to the governor's office, but that didn't prevent former Gov. Bob Ehrlich's campaign from releasing a humorous web-only video outlining O'Malley's "greatest hits." While it never directly mentions the governor's side project, it still uses footage of O'Malley strumming an acoustic guitar and turns the governor's musical talents against him.

Most of the "hits" are taxes O'Malley and the General Assembly raised during a 2007 special session designed to close a $1.4 billion deficit. O'Malley and state legislators hoped the increases, along with spending cuts and the authorization of a referendum on legalizing slot machines in Maryland, would close the state's persistent deficit. O'Malley has alleged Ehrlich's big-spending ways created the gap.

So is the incumbent really responsible for all these "hits?"

"Economists have said this collection would place an unfair burden on low-income families" — That was the consensus of economists who spoke to the Washington Post shortly after the package passed. But those same economists generally said O'Malley's original proposal was more progressive before being watered down by the legislature.

Income tax increase — During the special session, the General Assembly passed an O'Malley-backed restructuring of the state income tax. Before the overhaul, everyone with an income above $3,000 a year paid 4.75 percent in income taxes. The legislation created additional brackets, so the richest would pay 5.5 percent. But it also expanded a tax-credit for low- and middle-income workers, so most Marylanders got a tax cut. 

Title fee increase — The fee for getting a title on your car increased from $23 to $50.

"the 20 percent sales tax increase" — The sales tax jumped from 5 percent to 6 percent. Like we've said before, Democrats quibble with the phrasing — it's 20 percent, but only a single percentage point.

"the new corporate transfer tax increase" — If you really want to understand what the this tax does, go to page 38 of this document. Otherwise, just trust us, it passed.

Tobacco tax increase — The tax on a pack of cigarettes increased from $1 to $2.

Vehicle excise tax increase — This is a little complicated, so we'll have this Gazette article from the time explain:

The vehicle titling tax jumped from 5 percent to 6 percent, but the tax applies only on the price difference between the new car and the trade-in. Previously, Maryland was one of the few states in which the tax applied to the entire cost of the new car.

"the Wealthy Marylander tax increase" —The "Wealthy Marylander" tax increase is an attempt to double-count the income tax increase on the richest Marylanders.This is actually referencing an additional income tax increase the General Assembly passed in 2008 on those earning $1 million or more a year. (It's often referred to as "the millionaires' tax.") It was intended to compensate for revenue lost when the legislature repealed a technology services tax that was originally passed during the special session. The ad indirectly blames this and the corporate income tax increase for stifling job creation.

Corporate income tax increase — The corporate income tax also increased, from 7 percent to 8.25 percent, with some of the additional revenue being routed in to the Higher Education Investment Fund.

"You bought all this for the low, low price of $6.3 billion over five years." —  The special session tax increases were included in two bills, one from the House of Delegates and one from the state Senate. If you add together the projected revenues from those two pieces of legislation, you get slightly under $6.3 billion.

Maryland revenues have failed to meet projections throughout the recession, so voters will likely end up forking over less than $6.3 billion (the five-year period doesn't end until fiscal year 2013). Nonetheless, this is how much O'Malley and state legislators thought they were raising taxes by, so it's a fair number for Ehrlich's campaign to use.

"... will pass massive tax increases in the middle of a recession ..." — The National Bureau of Economic Research, which gets to determine these things, says the most recent recession began in December 2007 and ended in June 2009.

The taxes were passed in November 2007, so they weren't technically passed during the recession. But most of them went into effect in January 2008, which was right after the recession began. And the full brunt of the recession didn't become clear until the stock market imploded in fall 2008.

But did legislators know a recession — the largest one since the Great Depression, to be specific — was coming when they cast their votes? It's doubtful.

You can argue this ad makes misstatements on the margins, but it's general thrust — Look at all the taxes O'Malley raised! — is accurate. While the governor might not like the sound of it, this ad is Mostly On Point.

Mostly on point

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