Will Taxes Increase Soon?

$1.5B Maryland budget gap looms

State sales tax receipts rebounded last month after a poor showing in March, assuaging fears that Maryland would face an even bigger deficit than the $1.5 billion projected shortfall. After March’s 3 percent decline from the same period last year, sales tax revenues grew by 2.8 percent last month over April 2006, according to numbers released Tuesday by the comptroller’s office. Fiscal analysts still consider that to be slow growth for the sales tax, most likely an indicator of the slow housing market, because construction materials are subject to the sales tax.

April also saw strong individual income tax growth, with a jump of more than 13 percent from the April 2006 numbers. Income tax receipts for March had been weaker than expected.

March’s decline had policymakers and fiscal analysts worried that, if the decline was indicative of what was to come in future months, the state’s total revenue for the fiscal year would be well below estimates. With lawmakers already grappling with a $1.5 billion gap between expected revenues and spending commitments, any further revenue decline would have had serious implications.

“It’s just a relief,” said Warren G. Deschenaux Jr., chief fiscal analyst for the legislature. “There was concern that, given the softness that we saw in March, that it foretold something ugly with respect to final payments of the income tax.”

April’s revenue collections indicate that, despite March’s blip, the state is on track with the official estimates for the year, with the exception of the sales tax. Comptroller Peter Franchot’s letter accompanying April’s revenue summary noted that sales tax receipts are the only revenue source that is below expectations for the year. Deschenaux said analysts had expected to see growth in sales tax collections of about 4 percent for the fiscal year, which ends June 30. But so far collections for the year indicate growth of only 2.2 percent. “So long as the housing sector is soft, that sector of the sales tax is going to be depressed,” he said.

Gov. Martin O’Malley and legislative leaders put off dealing with the budget deficit during the session that ended last month, allowing O’Malley to take time to look for efficiencies in state agencies. But chatter has increased about the possibility of a special session later this year to deal the shortfall. The General Assembly is expected to consider a combination of budget cuts, tax increases and slot machines to raise the money needed to fulfill the state’s spending commitments.
http://www.mddailyrecord.com/article.cfm?id=135129&type=Daily