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Reviews mixed on special session

December 09, 2007|By ANDREW SCHOTZ

WASHINGTON COUNTY - After the Maryland General Assembly, in a whirlwind special session, agreed to a tax package of about $1.3 billion, the effects began to settle in.

A sales tax increase from 5 percent to 6 percent.

The tax on a pack of cigarettes doubling from $1 to $2.

A higher corporate income tax, an expansion of the sales tax to computer services, a higher personal exemption for income taxes.

Also, Marylanders will vote on legalizing slots in a November 2008 referendum.

Gov. Martin O'Malley pushed the tax-and-slots package as a remedy for a budget deficit estimated to be at least $1.5 billion.

Democrats supported the taxes, which they said averted deep cuts in a range of areas.

Republicans balked and fought against the increases, arguing in favor of tighter spending.

Last week, with the dust settled, a small cross-section of people in Washington County, from different walks of the community, were asked for their impressions of the special session.

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"Business lost, and it lost in a couple of ways," said Brien J. Poffenberger, the president of the Hagerstown-Washington County Chamber of Commerce.

He said the increase of the corporate income tax and the personal income tax at the highest levels could keep businesses from coming to or staying in Maryland.

The corporate income tax, he said, applies to both large businesses and small ones.

"Corporate income is personal income," Poffenberger said. "The inclination is, 'That's fat cats.' It's not. It's the person on Main Street running a shop."

The 'skinny' part

Timothy Troxell, the executive director of the Hagerstown-Washington County Economic Development Commission, agreed.

Washington County is in the "skinny" part of the state, close to both Pennsylvania and West Virginia, so the higher corporate income tax "make us a little less competitive," he said.

The sales-tax increase will hurt businesses as they buy supplies, Poffenberger said.

"Our position is, the state should have looked first at reducing spending before increasing revenue," he said.

David Jordan, the executive director of Community Action Council in Washington County, said the sales-tax increase affects everyone, but probably not much.

"I think that for most, it's not going to be as detrimental as some want to think," he said.

For low-income families with whom Community Action Council works, "the bigger issue is the rising cost of energy," he said.

Had the governor's tax-and-slots package not passed, the Maryland State Arts Council, which filters arts money to local communities, would have been damaged, according to an early proposal.

"The Arts Council escaped the proposed elimination," said a council memo circulated late in the special session. "Instead, its budget will remain at the current level through the next three fiscal years. While we are in agreement with staying level through FY09 (fiscal year 2009), we feel that the freeze should not remain in effect through FY10 and FY11."

"I was pretty confident all along that our legislators would deal with this fairly, and they did," said Kevin Moriarty, the executive director of the Washington County Arts Council. "It was a tough job, and they met the responsibility very capably."

Moriarty said the threat of cuts has inspired the state's Department of Business Economic Development, which includes the State Arts Council, to take a renewed look at the best ways of spending money.

Washington County Free Library Director Mary Baykan said there was talk of delaying library funding increases, but it didn't come up in the final version of a bill.

"The library community is cautiously optimistic because we were not targeted for any cuts," she said.

At the local level, new and higher taxes will hurt, said John F. Barr, president of the Washington County Commissioners.

"Any time there's tax increases, it costs individuals personally or as business owners," he said.

Barr, the president of Ellsworth Electric in Hagerstown, said the higher sales tax creates a problem for companies that bid jobs months in advance, only to find out that costs will go up.

The county expects to lose "several million dollars" because of cuts and changes made during the special session, he said.

At the same time, "it's good they met early and took initiatives to do something to counteract the deficit," Barr said. "It did get some things out of the way."

Working class strain

Diane Eves of Hagerstown said government's attempts to keep raising money puts a strain on the working class.

With little ability to raise money from goods or services, "most of the state's income is coming from people's pockets" and the state should put limits on its spending, she said.

After being "blown away" by a property reassessment more than two years ago, Eves helped start a local tax-relief movement called Alliance for Reasonable Taxation.

At least 200 people are on the Alliance's mailing list, but Eves said she hasn't heard many comments from them about the special session.

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