The Maryland General Assembly early Monday morning approved the largest package of tax increases in state history, handing Gov. Martin O’Malley a major victory for his politically risky proposal for tax increases, slots and budget cuts.

The close to $1.4 billion in sales, income, cigarette and corporate tax increases will go to help fund a deficit next year, largely produced by increased aid to education. The increases will also help fill a depleted transportation fund with $400 million in new money to build long-delayed road and transit projects.

“We were able to pass a fair, long-term solution to a $1.7 billion structural deficit, and more importantly we were able to get Maryland back on the path to progress,” O’Malley told a room of legislators, before he signed the bill. “This is one of the toughest thing we have to do in a representative democracy. … To tell one another, yes, we have to sacrifice because we have to invest more. It was hard to ask people to do more but it would have been irresponsible not to ask the people to choose to make progress.”

The biggest chunk of new revenues — close to $1 billion — came from increasing the sales tax and expanding it to computer services. The legislature also raised income tax rates for people with incomes over $150,000, but reduced rates for people making less than $100,000 by raising the personal exemption. Because of that, net revenues from the income tax only rose $30 million, and 95 percent of Marylanders will pay lower state income taxes.

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“This was a tough undertaking,” said House Speaker Michael Busch. “You have to give Governor O’Malley a lot of credit for helping to resolve the issue even though it was something he did not make.”

“This is the boldest move, the boldest action of any governor I have served with,” said Senate President Thomas V. Mike Miller. “It was an overwhelming success … but if he had failed, he would have failed greatly.”

The governor “risked a lot of political capital,” Miller said. His numbers are going to drop briefly. There’s a little bit for everybody, but not everyone is going to be happy.”

Republicans were unhappiest of all. The Senate repeatedly voted to shutoff debate during eight hours of on-and-off action.

“We have a credit crunch, we have a housing crunch, we have gas over $3 a gallon, we have oil approaching $100 a barrel, now [taxpayers are] going to have to worry about how they’re going to feed the state government,” said Senate Republican leader David Brinkley. “This is not the time to be doing this. The state has spending problem, not a revenue problem. This is a very regressive structure that passed.”

llazarick@baltimoreexaminer.com