Debate begins over Md. tax cut

December 07, 1996


Staff Writer

How would you like another $167 in your wallet?

If you live in Maryland that could soon happen, as key state lawmakers are supporting a 10 percent cut in the state's income tax. That would come to a $167 annual savings for a family of four with an annual income of $50,000, according to the state Department of Budget and Management.

But before you grab the cash and book that round-trip flight to Orlando, the debate over the tax cut and what its effect on schools, social programs and even other taxes is just beginning.

"It just seems a strange time to be hearing about a tax cut," said Cheryl Walkley, executive director of the Washington County Community Action Council.


The nonprofit human services agency that provides financial assistance and other services to the homeless and needy has already seen its budget slashed by tens of thousands of dollars in recent local, state and federal cuts. That's why the specter of a tax cut, and potentially yet another cut in funding, looms large.

"We are very much afraid this cut will result in less services to low-income - and perhaps to higher-income - people," she said.

But business leaders have been demanding a tax cut for years, saying Maryland's 5 percent income tax, which ranks about the fifth highest in the nation, is a deterrent to job growth and businesses looking to locate in the state.

"We just stand out badly, no matter how you look at it," said Fred K. Teeter Jr., executive director of the Hagerstown-Washington County Chamber of Commerce.

The political force behind a tax cut has been building since the legislature ended its last session in April. First came House Speaker Casper R. Taylor Jr.'s proposed 10 percent cut over three years and then Gov. Parris N. Glendening followed with his own 10 percent reduction plan.

With such powerful support, local lawmakers predict the real battle taking place when the General Assembly starts its 90-day session next month won't be over if the tax cut will happen, but rather how it will happen.

And few lawmakers are willing to predict that one.

"I don't have all the answers just now. I'm still learning," said Del. John P. Donoghue, D-Washington, a member of the House of Delegates committee that is studying tax issues.

Glendening's plan would cut and unspecified $257 million out of the state's $14.6 billion budget, and that has caused worry among many of those accustomed to state aid.

"I think most educators are concerned there will be an indirect impact," said Washington County Schools Superintendent Wayne F. Gersen.

Gersen said even if the state maintains its education funding, as Glendening has vowed to do, schools could still be affected by the trickle-down of less state funding going to local governments and other programs.

Glendening has said he won't cut local aid, but some are skeptical that can be done, especially since past state cuts have relied heavily on reductions in state programs, while the aid to local governments has increased.

"You can tell, then, what's going to happen when you turn around and start to cut this time," said Del. D. Bruce Poole, D-Washington.

"In some way, shape or form, fewer state funds will find their way to the county," Gersen said.

And Gersen isn't too confident about the theory that an income tax cut will actually help education funding because of the business and job growth it will create.

"That's a pretty big leap of faith," he said.

Few believe cuts alone will make up for the estimated $450 to $485 in lost income tax revenue. Meanwhile, Glendening is proposing a variety of new spending initiatives, including a pay raise for state troopers, a plan to purchase 90,000 acres of open space to combat suburban sprawl and proposal to give one year of free college education to any high school student with a "B" average.

"We're just curious with everything he has proposed program-wise, how is he going to pay for it?" said Del. Robert A. McKee, R-Washington.

Glendening has proposed doubling the state's 36-cent cigarette tax to pay for much of his income tax cut.

Taylor has floated several ideas, such as expanding the state's sales tax to cover services currently not taxed and increasing the state's share of property taxes.

Several proponents of a tax cut have already lined up to criticize the idea of "shifting" the tax burden, saying it results in no real tax cut.

"These guys obviously think we're stupid," said Hagerstown businessman Vincent Dellaposta, who also serves as chairman of the county Republican Central Committee.

Poole said he also disagrees with raising one tax to cut another.

"To me, that should be a last resort. . . . I think the key is to find everything in our power to cut the income tax without raising another tax," he said.

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