REMARKS OF PROGRESSIVE NEIGHBORS CHAIR GEORGE VLASITS

“PROGRESSIVE SOLUTIONS TO THE STATE BUDGET DEFICIT” MEETING

September 28, 2007
(See also our fact sheet on the Maryland Budget, as well as our list of alternatives for the budget)

“I want to make three points this evening and to challenge our elected representatives to respond

First - That we have a budget crisis brought about in large part by a regressive tax structure which places a heavy tax burden on those least able to afford it, and fails, miserably, to meet the needs of the residents of our great state.

Second -That failure to produce a more progressive tax structure and continuing to place the burden of taxes on the middle classes and the poor is a recipe for disaster, in that it will feed the anti-tax, anti government right the issue they need to defeat progressive programs to improve education, to begin the clean up the environment, to meet the health care needs of our citizens, to protect the voting process, and so on.

Third - That the current political climate offers us an opportunity to bring this issue to the public and fight for a truly progressive tax system.

Maryland is not a poor state; per capita income is among the highest in the nation. And the spending per capita of the Maryland State Government is below the national average. Yet we have a 1.7 billion dollar deficit. We have to look elsewhere to find the problem. But not far if we look at where the state gets the large majority of its revenues – Income Tax and Sales Tax.

Sales taxes are generally regressive – that is those with lower incomes end up paying a larger % of their income in taxes than do those in the upper brackets.

At first sight, Maryland’s income tax looks like it is a flat tax, but it too is essentially a regressive tax. Everybody pays 4.75% of their taxable income over $3000 but since the wealthy have larger itemized deductions than those at the lower end of the income scale (who, for the most part, can only use the meager standard deduction) they end up paying a smaller % of their income in taxes than do those in the lower income bracket.

Many years ago, a movement called the Progressives established the very reasonable notion that taxation ought to be based on ability to pay. The first federal income tax in 1913 for example was a tax on the wealthy. Only families making more than 4,000 dollars a year were taxed – that at a time when the average worker made about 1,000 dollars a year.

But the last 30 years has seen the New Right’s attack on progressive taxation as part of their strategy to (and I paraphrase Grover Norquist) shrink the government to the point that they can wrap it up and throw it away.

The only effective response by Progressives is to re-invent progressive taxation. Otherwise we will hand the right the same issue they have exploited successfully in the past 30 years and they will be able to brand us as “Tax and Spend Democrats”.

That is why we oppose raising the sales tax. That is why we oppose slots as a “solution” to the deficit. These taxes simply replicate the existing regressive tax system.

But, we were told “You can’t raise enough money to close the deficit and provide additional revenue, without slots and a general rise in the sales tax.” Not true! We have come up with some options that don’t require slots and a 6% sales tax and do begin the process of making the system progressive.

Our income tax proposal will result in an across the board tax reduction for the majority of Maryland’s tax payers and will still raise in the neighborhood of $700 million. It could raise even more depending on where the brackets are cut off. Raising the corporate tax 2% and closing the two biggest corporate loopholes would bring in $441 million more. Expanding the sales tax to selected services (luxury services and business and financial services) can generate a substantial sum (depending on exactly what services are included).

The problem is not what is possible; there is certainly a lot of flexibility in exactly how a restructuring of the tax system could be accomplished. Even within our steering committee we went back and forth on different ideas. What is needed is the political will to take us in a new direction.

They say that politics is the art of compromise. But there are times when compromise is not the solution to problems. Compromise in this case will simply postpone, at best, dealing with the problems. Compromise is, in fact, the reason we are in this situation now.

There is another word that begins with “C” that is heard all too infrequently in politics – Courage. It is time for our legislators to have the courage to stand up for what is a real solution to the budget crisis – a restructuring of the tax system along the general lines laid out tonight.”