Taxing matters

Frank A. DeFilippo

November 01, 1990|By Frank A. DeFilippo

GOV. William Donald Schaefer has a tax problem. In fact, he has two tax problems.

The first is that Montgomery County wants a gas tax increase but opposes any tinkering with the income or sales tax formulas. And the second is that Baltimore wants an upward adjustment in the income tax but is against any boost in the gasoline tax.

To add to the standoff, Senate President Thomas V. "Mike" Miller, D-Prince Georges, has flatly predicted General Assembly

approval of a gas tax boost next year, while House Speaker Clayton Mitchell, D-Kent, has quietly passed the word that he will block any attempt to increase Maryland's 18-cent-a-gallon gas tax.

For more than a year, Department of Transportation officials have been promoting the idea of a gas tax increase of anywhere from 5 to 15 cents a gallon to replenish the state's depleted transportation fund.

And on Nov. 8, two days after the general election, the Linowes Commission is expected to make public its recommendations to overhaul Maryland's general tax structure.

The commission is expected to propose raising the taxable base, increasing the tax rate and, most controversial of all, taxing professional services such as attorneys', accountants' and doctors' fees. To bureaucrats this is known as revenue enhancement; to the rest of the state it's double talk for a tax increase. (Florida experimented with a tax on services but has since repealed its law.)

As if that weren't enough, estimates of the state's budget deficit range from $180 million to $322 million, depending on who's doing the talking. The real spreadsheet won't be known until the Board of Revenue Estimates releases its projections in December.

Against a backdrop of anti-tax fervor among voters and widespread hostility over government gridlock in Washington, Schaefer is already plumping for enactment of the Linowes Commission recommendations. He is chiding legislators that there is no need for further study. But key lawmakers disagree. More than likely, they will delay the plan for summer review.

There is a growing feeling that Schaefer will incorporate the Linowes proposals into his budget, making the guts of the plan the predicate for special programs in much the same manner as he tried to enact a "snack tax" to provide money for the developmentally disabled.

Maryland already has the highest gas tax in the region and one of the highest in the nation. To make matters worse, the federal government is adding another nickel a gallon to its take, effective a month from today. Schaefer's fiscal advisers believe that if they can slip an increase through the legislature, the public will blame President Bush and Congress.

In a sense, Montgomery County and Baltimore city have the same problem. They are both in desperate need of money. One is collapsing under the weight of its own prosperity; the other is an impoverished welfare colony.

Montgomery County (and Prince George's) are in a state of terminal gridlock. MoCo's roads and highways are choked with Jags, Benz's and turbocharged Saabs. Montgomery has more registered cars than licensed drivers.

Millions of dollars in highway and transportation projects are waiting to be built, including a light rail line from Bethesda to Silver Spring. The state is contributing $70 million for the trolley line, and the county is putting up $40 million. In addition, the state has just been whacked with a $175 million increase in its contribution to the Washington Metro system.

In Baltimore, the reverse of the medal is true. To make ends meet, the city has sold off many of its assets. The state owns and runs Baltimore's transportation system and is landlord for much of its prime harborside real estate. Maryland's contribution to the Washington Metro is designed to provide parity between the two transportation systems.

It's true that the state has been more than generous to the city with grants and handouts. But the city is now hoping for a permanent cure. Raising the income tax base will not hurt the city. One-third of its residents pay no taxes anyway.

With a new General Assembly soon to be sworn in and Schaefer a dead cinch to be elected to a second and final term as governor Tuesday, the story of 1991 will be a tale of relationships.

The overriding question is how Schaefer and the new legislature will get along and whether he will try to undercut the General Assembly, as he has in the past, by basing his budget on the Linowes recommendations.

And equally important is how Montgomery County and Baltimore city will treat each other when each is depending upon a separate piece of tax legislation.

It could be that each will hold the other hostage -- and neither tax bill will be enacted. Or it could be that they'll work together and NTC pass both. That's what friends are for.

Frank A. DeFilippo writes regularly on Maryland politics.

Still a great bargain

THE FEDERAL gasoline tax will increase from 9 to 14 cents a gallon a month from today, and as Frank A. DeFilippo notes above, Marylanders can expect an increase in the state gas tax.

But U.S. gasoline prices will remain among the world's lowest. The prices below are for a gallon of regular leaded gas on Aug. 25, three weeks after the beginning of the Mideast crisis.






Dublin, Ireland...$4.15

Norway... $4.10



Tokyo, Japan ...$3.76

Portugal ...$3.76



Spain ...$3.14

West Germany...$3.05


(Source: U.S. Department of Transportation, Associated Press, American Automobile Association. U.S. price is for self-service regular unleaded on Aug. 24.)

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