June 7, 2010

Analysis: Basu predicts taxes will go up, local aid will go down

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CAMBRIDGE — Economist Anirban Basu told members of the Maryland Economic Development Association that he foresees what some Maryland Republicans have been predicting for months.

Taxes will go up next year, he said, and state aid to local governments will go down.

Basu, one of the most widely-quoted economic experts in the state, said in his annual review of economic conditions that “aid to local government will be slashed at every level” and “taxes are going higher,” particularly local property taxes to make up for the loss in state funding.

“State government has got to shrink,” said Basu, whose clients include the Maryland comptroller, state agencies and local governments.

“Local governments are really going to be holding the bills. Property taxes are about to go up.”

Asked what would be the best taxes to raise, Basu said the gasoline tax, since “the gas tax produces jobs” through spending on roads and transit.

Basu criticized how federal stimulus dollars were spent, with less than a quarter of the money going to infrastructure, and much of that being spent on road resurfacing. By contrast, he said the Chinese economy continued to have strong growth because all of its almost $600 billion in stimulus cash was spent on infrastructure.

Basu said he continued to be concerned about the possibility of a “double dip” recession, and if July jobs numbers show no growth, there will be increasing pressure in Washington for a second stimulus package before the fall elections.

–Len Lazarick
Len@MarylandReporter.com