Sales Tax for Education The Linowes Plan -- II

November 26, 1990

"Despite its relative prosperity, Maryland is not supporting educational excellence." This conclusion of the Linowes commission studying the state's tax structure convinced members of the blue-ribbon panel to urge a broader sales tax to assist in the upgrading of local schools. It is a trade-off that makes sense.

In technical terms, Maryland's 5 percent sales tax is "underused." Only 15 percent of this state's total revenue comes from the sales tax; the national average is 25 percent.

The main reason is that the Maryland sales tax applies to a narrow range of items. The list of exemptions is ridiculously long. Moreover, services are not taxed at all. In a society that is increasingly driven by the service sector of the economy, this means less tax revenue.

All consumers should be treated equally. Why should you pay sales tax when buying a car, but not when you get it repaired? The commission recommends that services for necessities be excluded, but that most other services for repairs, personal needs and information be taxed. No more loopholes for dry cleaning or haircuts, lawn services or data processing.

Two other important items would be added to the tax list: Non-residential telecommunications -- faxes, cellular telephones and other technological advances -- and cigarettes. In one of the most egregious loopholes, Maryland does not impose a sales tax on cigarettes -- but does on alcohol. That special-interest exemption should end.

All this money ($330 million) would be put to good use. For years, Maryland's schools have been shortchanged by state and local governments. The result can be seen in the alarming "report card" issued recently by the State Department of Education on classroom performance: not one county gained even "satisfactory" grades in eight basic categories. Unless something is done, Maryland's next generation is in grave danger.

The Linowes panel suggests that money from a broadened sales tax be doled out to counties, with poorer subdivisions getting the biggest shares. It wants strict achievement standards to make sure this extra money goes to help kids, not to increase teacher salaries or add to the bloated education bureaucracy.

This translates into an extra $807 per student for Baltimore City, $613 for Harford County, $590 for Carroll, $457 for Anne Arundel, $370 for Howard, and $337 for Baltimore County. With tough accountability standards, it could lead to dramatic improvements the classroom -- and a brighter future for Maryland's youngsters.

Tomorrow: A progressive income tax.

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