Gov. Martin O'Malley's suggestion to add a penny to Maryland's sales tax has generated a lot of reaction, mainly against the measure.
The governor floated the idea during a radio interview Wednesday, saying the money is needed to address the state's budget problems.
Local business owners are not happy.
Any tax increase will only accelerate the departure of businesses from the state, said Gary Brooks, owner of Barley and Hops restaurant in Frederick.
"Our neighboring states are equal or less than what we are now, with Delaware at zero (sales taxes)," Brooks said. "You see on the radio and TV and in the paper our neighboring states promoting the fact that their sales tax is less than ours, so come shop in their state and save."
Retail sales are slipping because people don't have the cash to continue spending as much as they did when the tax rate was lower, Brooks said, and adding a cent will continue to hurt the small businesses of Maryland, resulting in loss of jobs.
Downtown Frederick retailer Joe Cohen, owner of Classic Cigars and British Goodies, said O'Malley's record of tax increases hurts local businesses.
Cohen said the governor raised the tax on tobacco products from 13 to 15 percent. O'Malley increased the tax on alcohol from 6 to 9 percent, "and he wants to increase the gas tax," Cohen said.
"There's a fairer way to do things -- eliminate the gas, tobacco and alcohol taxes and go for the sales tax," Cohen said. "It's not a fair tax but it's a fairer tax, because everybody pays the sales tax.
"But the main thing is O'Malley should stop spending," Cohen said.
Cohen equated the Free State's business climate with a sinking economic Titanic.
"All the governor is doing is rearranging the deck chairs," he said.
Maryland residents are getting no wage increases and losing their jobs, and by raising taxes the governor is causing more misery, Cohen said.
A 1-cent tax increase will pose problems for small businesses such as Viniferous wine shop on North Market Street in downtown Frederick, owner Bob Kannor said.
Not too long ago the business had to adjust to a tax increase from 6 to 9 percent.
Having to do it again will mean that "you will have to change your whole way of talking to people and tell them taxes are gone up," Kannor said.
Prices will go up considerably for a small business such as Viniferous, Kannor said.
"For those of us who are operating on tight margins, we will take a hit," he said. "It hurts small shops more than big ones. We can't compete with people who do bulk purchases."
Raising the sales tax becomes a trend, like the tobacco and alcohol tax, Brooks said.
Increasing the tax often falls short of desired results because purchases in the state decrease, so the state is forced to raise it again, Brooks said.
In December, the comptroller's office said that state revenue was down by $120 million, and some of that can be directly contributed to the decrease in in-state beer sales, Brooks said.
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