Is the Computer Tax Here to Stay? (Updated)

The Washington Post reports that Maryland’s Senate has not reached a consensus on how, or whether, to replace the much-despised computer sales tax. But Maryland Politics Watch readers have seen this coming.

Remember the now-legendary blogger interview of Senate President Mike Miller back in January? When we asked him about the computer tax, the Senate President answered, "The computer tax is not a good tax, but it’s $200 million and I’m going to fight to keep it... No one can agree on a replacement." And here’s our report on House Majority Leader Kumar Barve's comments:

"The House got rid of the computer sales tax but it came back. It’s bad public policy. It’s unwise to tax businesses that are mobile," Barve stated. "But unless we’re willing to find $200 million in extra revenues, it will be very difficult to get rid of." And why was the computer industry vulnerable? "In politics, when something unpleasant has to be done, it’s usually done to whoever squirms around the least!" Barve noted that Senator Rob Garagiola (D-15, MoCo) had a proposal to replace it with a gas tax, "but that is a non-starter." Added to Mike Miller’s comments, Barve’s opinion indicates that the computer tax is not going anywhere because there is no other way to raise the money.

Mr. Miller’s and Mr. Barve’s political predictions have been proven correct. When the Republicans proposed spending cuts and tapping "unallocated funds" to pay for a repeal, the Senate rejected it. When Senate Democrats proposed an income tax surcharge on the rich, Montgomery County officials opposed it. Time is running out: the current session has less than a month left and the computer tax is due to take effect this summer.

The tragedy is that it didn’t have to be this way. Governor O’Malley never proposed this tax. The House of Delegates did not propose it. And there were other ways to raise the money. An extra point hike in the corporate income tax could have raised at least $100 million and Maryland’s rate would still have been lower than Pennsylvania and D.C., equal to New Jersey and barely higher than West Virginia and Delaware. Combined reporting on corporate income taxes could have raised $25 million. Progressive Maryland believes it could have been worth $100 million. The legislature could have kept the Governor’s original higher income tax rates on individuals making $150,000, raising perhaps tens of millions more. And the legislature could have aggressively gone after tax-cheating employers but so far has not done so.

Instead, we are left with a looming, devastating tax on a knowledge-based industry critical to the state’s future. Everyone hates it. But no one has figured out how to get rid of it. Surely the Democrats in Annapolis can do better than this.

Update: The Sun reports that a surtax on millionaires is gaining ground. Democratic Senator Verna Jones's (D44-Baltimore City) proposal would raise $230 million by instituting a surcharge rate of 6% on incomes between $750,000 and $1 million and 6.5% on incomes above $1 million. But Montgomery County Executive Ike Leggett has written in opposition to the plan.

Update 2: The Governor has come out in favor of replacing the computer tax with the surcharge. However, Democratic Senator Robert Zirkin (D11-Baltimore County) has proposed to repeal the computer tax if the slots referendum passes. He also favors cutting transportation projects.

Senator Zirkin, I know my Montgomery County delegation is split on taxing the wealthy. But I would hope that all of them would stick together on opposing transportation cuts. All they hear is how horrible traffic congestion is from both their constituents and our County Council. Good luck in getting our eight State Senators to cut State Highway and transit projects in our county.

Mike Miller (and Kumar Barve) Meet the Bloggers: Part Three

In Part Two, I recounted the Senate President’s remarks to our rag-tag band of bloggers. In this part, let’s find out what the number two leader in the House had to say.

Kumar Barve, the House Majority Leader from District 17 (Rockville), is a fluid and intelligent speaker. His low-key style reflects the cool, technocratic politics still practiced in some parts of Montgomery County. While he is not as flamboyant a character as the belly-laughing, fist-pounding Miller, he has a tack-sharp mind, a dry wit and ample patience for blogger grillings.

Here’s what Delegate Barve had to say, as best as my scrawling hand could record:

On Governor O’Malley
“Martin O’Malley is a gambler. He likes to take calculated risks. He sealed 188 people in a pressure cooker and said, ‘Take as long as you want in there!’ And the special session produced a very good product.”

On Taxes and Spending
Barve described the last couple decades of state fiscal management as a “roller coaster,” noting that the state had swung between tax hikes and tax cuts. “I wish we could find a level of taxation we’re comfortable with and stick with that, but that would probably violate human behavior!” As Barve correctly observes, it’s too tempting to dispense tax cuts in good times, making tax hikes in bad times more necessary.

On Embattled State Superintendent of Schools Nancy Grasmick
“The Governor and the leaders want her to go. I assume that’s going to happen.”

On the Computer Services Tax
“The House got rid of the computer sales tax but it came back. It’s bad public policy. It’s unwise to tax businesses that are mobile,” Barve stated. “But unless we’re willing to find $200 million in extra revenues, it will be very difficult to get rid of.” And why was the computer industry vulnerable? “In politics, when something unpleasant has to be done, it’s usually done to whoever squirms around the least!” Barve noted that Senator Rob Garagiola (D-15, MoCo) had a proposal to replace it with a gas tax, “but that is a non-starter.” Added to Mike Miller’s comments, Barve’s opinion indicates that the computer tax is not going anywhere because there is no other way to raise the money.

On Marriage Equality
“I personally don’t think marriage equality is going to happen in the way we’ve sponsored the bill. But domestic partnerships will pass.” Senator Madaleno, the prime backer of marriage equality in his chamber, chimed in, “You start with what you want, and you fight for what you can get.”

On Filling Legislative Vacancies
I asked the House Majority Leader whether he would favor a bill allowing special elections to fill vacancies in MoCo and forbidding the practice of Central Committee members appointing themselves to state legislative office. The latter point actually made him laugh. “My goodness, if you took that away from them, no one would serve on the Central Committee!” Barve snickered. “We’d have to pay them to serve!” Barve indicated that he would vote for special elections on a statewide basis, but not for MoCo alone. He favors having every county use the same system for filling vacancies.

The Majority Leader’s sardonic suggestion that Central Committee members have to be paid to abstain from appointing themselves may be cynical, but it also may be true. The fact that the highest-ranking state legislator in MoCo holds this opinion of MCDCC should make them think long and hard about how they conduct their vacancy selections.

On the Democrats’ Relationship with Latinos
“I don’t think the Democratic Party is in danger of losing the Latino community. One of the problems from a strategic perspective is that many of the groups we support have the lowest turnout rate. But things are changing. People of color are noticing how bad things are under Republican rule.”

On Whether the Delegation is Bringing the Bacon Back to MoCo
I asked Barve this question: “The Gazette recently reported that of every dollar paid by MoCo residents to the state, only 15 cents came back to the county. The state average is 30 cents. When county officials and residents accuse the delegation of not bringing the bacon back to MoCo, how do you respond?”

Barve answered by pointing out the geographic income disparities of the state. “We generate an enormous amount of income. Eighty-five percent of the richest people in the state live in Montgomery County. And if you earn $200,000, no matter where you live, you are going to be taxed. A lot of social programs go to where poor people are living, like in Baltimore City. And it’s the job of government to help people who desperately need the help, wherever they live.”

I understand this argument but only up to a point. MoCo may be wealthier than the state average, but it is not universally wealthy. There are pockets of poverty even here. There are lots of needs for school aid, school construction and transportation. Our state transportation priorities list is full of projects that have sat in limbo for many, many years. The BRAC projects alone will likely demand hundreds of millions of dollars to be effectively implemented. I for one would like to see my MoCo state legislators throw their weight around a bit more than they currently are.

And now we get to David Lublin’s Big Question, which was asked of both Senate President Miller and House Majority Leader Barve. Correct me if I’m wrong, David, but the Big Question went something like this:

“In 2006, the Democrats had as good a year as it gets. George Bush was President. We were fighting an unpopular war in Iraq. The Republicans had hopelessly mismanaged the response to Hurricane Katrina. So the Democrats won a lot of extra seats. In 2010, those things will not repeat themselves. Bush will be gone and the Democrats will be held responsible for whatever is going on. You are more likely to lose seats than gain them. So how can you motivate Maryland’s progressive voters for the next election?”

Uncharacteristically, Mike Miller dodged this one. He flatly disagreed that the party would lose any seats and contended that Governor O’Malley’s progressive record would serve the Democrats well. Kumar Barve also refused to concede that the party would lose any seats. He responded, “In Maryland, we have modest taxation and very low poverty. Maybe we should point out how bad things are in other states that are run by the Republicans.”

Is this really a winning message for 2010? We may have raised your taxes, but the other guys are worse? Is that going to motivate liberals to turn out to save Democratic seats in purple districts? I hope we’ll have a better message than that, but I guess we’ll see.

Until then, let’s credit Senate President Mike Miller and House Majority Leader Kumar Barve for willingly sitting in the Bloggers’ Hot Seat. They were good sports and did their best to deal with an unlikely gathering unseen since the Mos Eisley Cantina. Let’s see if any more politicians have the mettle to do the same.

Mike Miller Meets the Bloggers: Part Two

In Part One, we laid the scene for you: on one side of the table sat the fearsome, powerful old bull, the indomitable Senate President Mike Miller. On the other side sat a gangly, geeky band of bloggers, united only by their common desire for a post-meeting trip to Ram’s Head Tavern.

A few comments on the Senate President. For more than twenty years, Mike Miller has reigned over the Senate with a gregarious combination of ego, fear and patronage. His personal magnetism is so overwhelming that he could likely charm a bird out of its nest and onto his open palm. But if the bird voted the wrong way on a must-have bill, the hapless creature would be quickly crushed and tossed to the back of the Senate chamber. This demonstrates the Miller Rule, which is a simple one: “Work with me and prosper. Work against me and suffer.” Most Democratic Senators respond to this rule predictably, although there have been exceptions.

We asked Miller a lot of questions, and he gave us a lot of answers. For the benefit of our readers, I did my best to keep up with the exchange. Following are the Senate President’s responses to a few of our prods and pokings. If anyone else in the room recollects it differently, please comment and we’ll adjust the record.

On Governor Ehrlich
A few people remember that at the beginning of Governor Ehrlich’s term, Miller was ready to establish a pragmatic working relationship with him. But that approach ran into problems. “Ehrlich was a nice guy, but he didn’t work, and the state suffered,” Miller grumbled. He was “surrounded by yes-men” and rarely came out of his office. “All he did was put bandages on things!” The old warhorse was clearly relieved to see him gone.

On Governor O’Malley
Miller gave O’Malley lavish credit for moving to act on a deficit that he inherited, even if it cost him politically. “O’Malley knew his numbers would go in the toilet no matter what he did, so he did the right thing.” Miller attacked some of the Governor’s opponents, criticizing them for being “mean-spirited” and spreading rumors. “The Governor is a very progressive person,” Miller insisted. But he warned, “This Governor, in order to get his numbers up, will have to do some things you won’t like.” As an example, he mentioned a new emphasis on crime prevention, not always the highest priority of liberals.

On Slots
As perhaps the greatest champion of slots in the state, Miller’s views are well-known. “We have got to have that money!” he cried. The Senate President predicted that a possible recession would hurt tax revenues, thereby making slots money all the more necessary. “We need to get the slots bill passed whether you like it or you don’t like it!” Miller thundered. So in case you were wondering if Mike Miller had changed his mind on slots, the answer is NOPE!

On Transit
I asked Miller if he had a choice to fund the Washington suburbs’ Purple Line or Baltimore’s Red Line, but not both, which of the two he would pick. I was sure he would dodge this one, but to his credit, he did not. “The Purple Line!” he declared. “You know, I was a University of Maryland – College Park graduate.” Miller pointed out that he proposed a 12-cent gas tax last year but he could not round up enough votes for it. “We need to move forward as quickly as we can on mass transit.”

On Illegal Immigration
“There aren’t more than 2% of the people that understand immigration,” Miller snorted. “If you crack down on illegal immigrants too much, they’ll just bring their families over here.” The Senate President does not support the draconian measures implemented in parts of Virginia, saying, “John McCain tells the truth on this issue.” As for drivers licenses, Miller says, “The Governor has spoken on this. He considers this a national security matter. It’s a tough issue.” Miller did not contest the Governor’s decision to abide by the federal RealID law and end the state’s practice of issuing drivers licenses to illegals.

On the Regressive Nature of the Special Session Tax Package
Regular readers will recall how I criticized the Senate President for the regressive character of the special session tax package. Leaping into the jaws of the lion, I asked him the following question:

“The tax package that was passed by the special session collected the majority of its revenues from raising the regressive sales tax. If you could have that one back and do it over, would you have taxed the rich a bit more to give the working people a break?”

Miller did not back down from the sales tax. He described it as “the most regressive but also the most acceptable” of the taxes, claiming that he received little protest on it. “But I wish I could have had more from the income tax.” Miller noted, accurately, that part of the Montgomery County delegation, backed by their County Executive, pushed back against the Governor’s rate increase for the top income tax brackets, thereby limiting the legislature’s ability to raise them. “You need 24 votes to pass something through the Senate and I didn’t have the votes to spare!” For the record, let’s stipulate that nobody – absolutely nobody – knows more about getting 24 votes in the Maryland Senate than Mike Miller.

The Senate President has a point and perhaps I was unfair with him. It is true that a substantial portion of MoCo legislators pushed back against the top income tax rate hikes but did not criticize the sales tax. If that part of the MoCo delegation did not protest the tax hikes on the rich, there would have been less need to rely on the more regressive elements of the package. And who knows? Perhaps there would have been less pressure to resort to the much-hated computer services tax.

So while I don’t agree with Miller’s assertion that the sales tax increase is in any way “acceptable,” I will no longer criticize him as primarily responsible for encouraging regressivity in the tax package. There’s plenty of responsibility to go around for that.

On the Computer Services Tax
“The computer tax is not a good tax, but it’s $200 million and I’m going to fight to keep it!” The principal reason for keeping it? “No one can agree on a replacement.”

So other than David Lublin’s Big Question, which I’ll address in Part Three, that’s what I have from Mike Miller. Even though many liberals occasionally disagree with the Senate President, let’s give him his due. He implemented a tough agenda of deficit reduction on the Governor’s behalf. He is more straightforward in answering questions than most politicians. And he keeps a lid on the natural parochialism that might otherwise prevail in the Senate through a hardened mix of guile, intimidation and pragmatism. With a weaker Senate leader, the special session may very well have failed and the need to raise taxes this year would be much greater. So you may not like Mike Miller. But you should respect him.

Even though Senator Jamie Raskin of District 20 (Silver Spring/Takoma Park) attended our blogger fest, we did not flay him as we did his colleagues. In Part Three, you’ll hear from House Majority Leader Kumar Barve.

Mike Miller Meets the Bloggers: Part One

It had to happen. Superman met Muhammad Ali. The King met Nixon. Alien met Predator. And last night, Maryland Senate President Mike Miller met the Bloggers.

How on Earth did this epochal event occur? Senator Rich Madaleno, political patron of the left-wing blogosphere, summoned us to Annapolis for an audience with the most powerful man in Maryland history to never serve as Governor. And so nine of us came from every corner of the state, some emerging from filthy basements, some crawling from cigarette-strewn alleys and others reluctantly shuffling out of comic book shops. None of us knew how the greatest culture clash since cream cheese Sushi was going to turn out.

A note on the bloggers. This may shock you, but they tend to be on the dorky side. Really. A white kid from Baltimore walked in with bright green earrings and a furry Afro. Following him was a middle-aged MoCo liberal with gray hair screaming down his back to be let loose from its unkempt pony tail. One blogger ranted about Massachusetts transportation policy to a glassy-eyed Senate President. Another earnestly pressed his essay on “Green Rail” into the hand of every legislator who would take it. The middle school teacher seemed fairly normal until he began reciting long-lost Industrial Workers of the World leaders unknown to even this former labor history instructor. Look, I’m not naming you guys, but I know you’re reading this and you know who you are.

Golly Wally, we’re a bunch of cross-eyed geeks! So why would Mike Miller and fellow attendees Madaleno, Senator Jamie Raskin and House Majority Leader Kumar Barve want to talk to a raggedy crew like us?

The answer lies with Senator Madaleno. As an occasional blogger himself, Madaleno understands that blog readers are becoming a critical niche in the state’s political scene. Blog readership may never exceed the levels achieved by MSM outlets. But Madaleno knows that blog readers tend to be better-informed, more inclined to civic activism, and more likely to volunteer and contribute to political campaigns than the average MSM readers. That makes you, dear readers, a valuable political constituency. And the Maryland Democrats are starting to realize this.

So by talking to us, Senators Miller, Madaleno, and Raskin and Delegate Barve are really talking to you. What is it that they want to tell you? You’ll just have to keep chewing on that towel and wait until Part Two to find out.

Who’s Got the Biggest War Chests in MoCo?

If you have not done this already, go visit the UMBC Maryland Campaign Finance website. It’s a fun research tool and you’ll learn things about politicians you won’t believe. For example: who’s got money and who’s broke?

We here at MPW are, as always, dedicated to our growing legions of devoted readers. As usual, WE will do the work so that YOU – the informed political consumers who know enough to visit us every day – can draw your own conclusions. So, let’s go to the data!

Broadly speaking, candidate finances are reported in five categories: receipts, expenditures, cash/account balance, in-kinds and outstanding obligations. Think of the difference between account balance and outstanding obligations as a political balance sheet. High balances with no obligations can be liquidated as political ammo immediately. Outstanding obligations are almost always loans that candidates make to themselves. With every dollar they spend, candidates with high outstanding obligations are deciding whether to keep running for office or replenish their depleted nest eggs. These being politicians, most will decide to buy that extra campaign sign.

The last financial reports came in as of 1/17/07. The next batch should be in around Valentine’s Day – fitting, don’t you think? Of course, a lot has happened over the last year but fret not – we will update you.

So which MoCo state legislators have the most money? Measured by campaign account balance, the three best-financed MoCo Senators were Jennie Forehand (D17 - $64,092), Brian Frosh (D16 - $41,667) and Rob Garagiola (D15 - $31,024). The three poorest MoCo Senators were Jamie Raskin (D20 - $4,821), Mike Lenett (D19 - $7,518) and Nancy King (D39 - $8,875). To be fair to King, she was only recently appointed to the Senate.

Among the MoCo Delegates, the three best-financed were Susan Lee (D16 - $66,027), Heather Mizeur (D20 - $38,869) and Jeff Waldstreicher (D18 - $32,158). The three poorest were Al Carr (D18 - $280), Brian Feldman (D15 - $338) and Saqib Ali (D39 - $391). To be fair to Carr, he was not a Delegate at the time of his last report.

It’s not just about account balance though. Remember those pesky outstanding obligations? Sometimes they’re not merely pesky – they’re absolutely colossal. I know it’s shocking, but some politicians will spend lots of their own money to win. The only three MoCo Senators who reported outstanding obligations were Mike Lenett (D19 - $160,000), Jamie Raskin (D20 - $20,000) and Rob Garagiola (D15 - $10,000). All had contested races and all of these obligations were loans to their own campaigns.

The Delegates who reported the largest outstanding obligations were Ben Kramer (D19 - $114,450), Roger Manno (D19 - $70,000) and Jeff Waldstreicher (D18 - $42,417). Again, all had seriously contested races and all of their obligations were loans to themselves. So dear reader, if you had to put in $100,000 of your own money to just have a shot at winning office, would you do it?

Now here’s the interesting part. Subtract outstanding obligations from account balances and which incumbents were the most solvent? Among MoCo Senators, the leaders were Jennie Forehand (D17 - $64,092), Brian Frosh (D16 - $41,667) and Rob Garagiola (D15 - $21,024). No surprises there. But two Senators actually had negative net assets – Mike Lenett (D19 – negative $152,482) and Jamie Raskin (D20 – negative $15,179).

Among the delegates, the leaders in net assets were Susan Lee (D16 - $66,027), Heather Mizeur (D20 - $38,869) and House Majority Leader Kumar Barve (D17 - $30,843). The worst off were Ben Kramer (D19 – negative $113,252), Roger Manno (D19 – negative $67,611) and Al Carr (D18 – negative $19,370). Seeing as how Kramer and Manno serve in the same district, they would be wise to run together on a slate to avoid bankrupting each other.

One note of caution. Many of these candidates have joint slate accounts that pay for multi-candidate signs and mailings. Those who stick together on slates and collect the Apple Ballot need less money to win (and almost always do win). So monetary weakness does not always equal political weakness.

What about potential Delegate challengers? Jean Cryor (D15), Joan Stern (D39), Aaron Klein (D20), appointment candidate Hugh Bailey (D39) and Ryan Spiegel (D17) all finished with positive account balances, though Bailey and Spiegel had very little money left. Regina Oldak (D16), Paul Griffin (D19), Alec Stone (D19) and Dana Beyer (D18) all finished with five-digit outstanding loans to themselves. Beyer’s outstanding loan total – $75,000 – was only exceeded by Lenett and Kramer. These four candidates will probably have to choose between running for office again or making a down payment on that Eastern Shore beach cabin we all want. Crab-loving hedonist that I am, I’d take the beach cabin.