How to improve basic services in Maryland's 12 poorest counties without harming other subdivisions? The Linowes commission studying the state's tax structure would distribute $102 million to the poorest 12 but leave existing revenues flowing to other counties. The vehicle: A higher and truly graduated state income tax.
For most taxpayers, this will not mean more taxes. Two out of every three Marylanders would see their state income taxes lowered. A family of four with an adjusted gross income of would pay $240 less in taxes; a family with an income of $50,000 would save $186.
Yet because tax rates would be raised for high-income families, this progressive income tax would yield an extra $102 million. That's the money the Linowes commission earmarks for the state's financially strapped subdivisions.
These counties are in a desperate bind. In Garrett County, for instance, the local government's ability to raise funds is 40 percent below the state average, yet its spending needs are 12 percent above the state average. In Baltimore City, both revenue capacity and spending needs are 40 percent worse than the average.
If this condition persists, the commission says poor subdivisions will be left with "damagingly high tax rates and unacceptably low service levels." That would blunt Maryland's growth.
The Linowes panel wants to use extra tax money to bring the 12 poorest subdivisions -- Baltimore City would be the biggest beneficiary -- up to the state's median for per capita income-tax revenue. None of the other counties would suffer a loss in their local piggyback income taxes, though.
All the new aid would come from a long-overdue revision of the state income tax, which has not been modified in nearly a quarter-century. It is essentially a flat-rate tax, with the top bracket kicking in at $3,000. The middle class ends up paying far more than it should, and the upper-class pays far less than it should.
To reverse this situation, the panel recommends an increase in the maximum income-tax rate to 6.25 percent (from the current 5 percent). But by spreading out the new tax brackets, the effective rate would diminish for most Marylanders. In fact, 1.4 million taxpayers would wind up with a tax cut, and only the state's 700,000 wealthiest citizens would see their taxes rise.
This restores fairness and equity. The yawning gap between rich and poor subdivisions would start to narrow. Every jurisdiction would have the financial tools to give its citizens adequate public services. Sadly, that is not the case today.
Tomorrow: Money to build better roads.