Battle looms on tax report Schaefer favors much of plan

November 20, 1990|By Thomas W. Waldron | Thomas W. Waldron,Evening Sun Staff Laura Lippman and Michael A. Fletcher contributed to this story.

Gov. William Donald Schaefer is praising a new report calling for major increases and restructuring of state taxes, while lawmakers and others are lining up to do battle over its ambitious agenda.

Schaefer called the report of his specially appointed tax commission "well thought out," and said many of its ideas should have been enacted long ago.

"Some changes in the tax structure have to be made, there's no question about that," Schaefer told reporters yesterday. "No one in the past had the intestinal fortitude to do it."

Schaefer stopped short of embracing any of the report's specific proposals, which include increasing income tax rates and the sales tax, reducing local property taxes, and expanding the sales tax to include many services that are now untaxed.

But the governor said the report did accomplish his two main goals when he appointed the commission in 1987: reducing the state's dependence on property taxes and avoiding helping any one jurisdiction at the expense of another.

The commission's mandate was to evaluate the fairness of Maryland's system of raising and distributing taxes and to recommend ways to improve it. The proposals are aimed partly at minimizing disparities in government spending, especially in education, between poorer and more affluent jurisdictions.

Meanwhile, legislators and representatives of various business and community groups began their verbal war over the report -- known as the Linowes Commission report after the chairman, R. Robert Linowes -- which is not even due to be officially released until the commission adopts it Nov. 28.

"What we're really encouraged by is the report clearly recognizes the significant disparities in the state," said James Brady, president of the Greater Baltimore Committee's public policy council. "In a perfect world, this would not be a perfect time [to raise taxes] but that's a moot point. We don't have the time to wait. We don't have the time to wish everything was rosy."

Senate President Thomas V. Mike Miller Jr., D-Prince George's, said he would keep an open mind about the report, which he called "the fiscal change of the century."

But, he added, "I don't sense any sentiment for any increase in the sales tax. To me, it runs counterproductive to anything ever contemplated to dealing with recessionary times."

In total, the Linowes report calls for an increase of about $800 million in taxes in 1992. As part of the package, local governments would have to reduce their property tax collections by a combined $180 million statewide.

The commission recommends raising the state sales tax from 5 percent to 5 1/2 percent and applying it to two dozen services for the first time, including cable television, car repairs, janitorial services and data processing, services that Linowes said were non-essential.

It also proposes new income tax rates that would increase the maximum combined state and local rate from 7.5 percent to 8.75 percent, bringing in an extra $102 million. While income taxes would increase for about one-third of the state's taxpayers, they would decrease for about two-thirds of the taxpayers, shifting more of the tax burden to wealthier taxpayers, the report says.

The committee also proposed subjecting motor vehicles and boats to a new 2 percent "personal property" tax, levied annually on the value of the vehicle. The new tax on cars would raise $374 million in 1992. That money would be split with local governments and be used solely for transportation projects.

"It's pure and simply a question of fairness," Linowes said yesterday. "It's a question of should those who have the ability pay more, and should those who don't have the ability pay less."

The package also includes a new program of state grants to local governments to allow them to reduce their property tax rates.

Baltimore, along with other poorer subdivisions, would make out well under the commission's plan, while more affluent places such as Montgomery County would receive only modest amounts of new state aid.

Predictably, Baltimore officials were quick to embrace the plan, which most of them have only read about in newspaper !c accounts. City Council President Mary Pat Clarke called the recommendations "an essential part of our recovery program," while Mayor Kurt L. Schmoke said they would help the entire state, not just the city.

"People forget that we have the bulk of the poor, the homeless, the released mentally ill," said Sen. Barbara A. Hoffman, D-City. "The needs of the city are horrendous to begin with. Basically, you're changing the system to be more equitable, but not hurting one county on behalf of another."

Officials from elsewhere in the state, meanwhile, were more critical.

"It's not as bad as it initially could have been," said Del. Mary R. Boergers, D-Montgomery, who was elected two weeks ago to a Senate seat. "But, from an individual taxpayer's perspective, they are very, very anxious financially. They are not in the mood to pay additional taxes."

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