The Linowes theme: Those who can, will

November 28, 1990|By Thomas W. Waldron | Thomas W. Waldron,Evening Sun Staff

Call them Joe and Jane Potomac. They earn $150,000 a year and live in a $250,000 house in Montgomery County. They drive expensive cars. On weekends, they and their two children zoom around Chesapeake Bay in their cabin cruiser.

They have much to fear from the new Linowes Commission report that recommends big changes and big increases in Maryland taxes. The report was to be formally unveiled in Annapolis today.

The Potomacs would be hit with increases in income tax, sales taxes and new taxes on their vehicles. They would save some on their local property taxes, but their total net tax bill, thanks to Linowes, would increase by $2,251, according to estimates by The Evening Sun.

Meanwhile, another couple of more modest means -- call them Mike and Martha Patapsco -- have good reason to like the Linowes report.

The Patapscos live in a $60,000 rowhouse in Baltimore with their two children. They have a modest income of $50,000 and their one car is a clunker. Their boat is still only a dream.

The Linowes plan would actually mean a net reduction in the Patapscos' state and local tax bill of about $67, according to calculations by The Evening Sun.

The Potomacs and the Patapscos are hypothetical families created by The Evening Sun to illustrate the impact of th Linowes Commission proposals.

The gaping difference in the two families' proposed tax burdens reflects a cardinal principle of the Linowes Commission: tax people according to their ability to pay. To that end, the commission would raise income tax rates, particularly on the more affluent, and impose a new 2 percent levy on automobiles and boats, based directly on the value of the vehicle. Property taxes, which are not based on a taxpayer's ability to pay, would drop. The sales tax would rise by 10 percent and would be applied to cigarettes and many services for the first time.

The plan would bring in about $800 million in new revenue for state and local governments, with most of it earmarked for education and transportation. Poorer subdivisions, including Baltimore, would make out well under the plan. Places such as Montgomery County that have larger numbers of middle- and upper-income residents, would see only a modest increase in revenue.

Gov. William Donald Schaefer, who appointed the Linowes Commission in 1987, has not announced what he will do with the report. Many legislators, however, have already panned the commission's ambitious agenda. And it is not clear if all or any of the report -- called the most significant Maryland tax proposal in decades -- will be enacted by the 1991 legislature.

If the entire package were enacted, Mr. and Mrs. Potomac would lose as much as almost anybody in the state. Mr. Potomac, a lawyer, has a gross income of $150,000. His wife doesn't work. After deductions, their taxable income is $110,000. Under the Linowes plan, which would increase rates and make the system more progressive, the Potomacs' state and local income-tax bill would rise $1,032, to $9,192.

Their two cars -- a 1989 Volvo and a 1988 Ford Taurus, worth a total of $25,000 -- are fun to drive but a new burden under the Linowes plan. A new 2 percent excise tax on each car will cost the Potomacs $500 next year.

Their boat, a cabin cruiser worth $24,000, will also be hit by the tax, at a cost of $480.

That's not all.

The Potomacs pay $200 a year to keep their lawn green and pristine. Next year, that would be subject to a 5.5 percent sales tax, under the Linowes plan. Cost: $11. Likewise their dry cleaning, car repairs and parking. Estimated total sales tax the Potomacs will pay on those three services next year: $119. The sales tax they pay on everyday purchases that are already taxed -- things like books and kitchen appliances -- would go up an estimated $180, thanks to a proposed increase in the sales tax rate from 5 to 5.5 percent.

If Mr. Potomac gets a little upset at tax time, he can pull out a cigarette to calm his nerves. Oops, that pack in his hand would cost 5.5 percent more. Joe Potomac, a pack-a-day smoker, will pay about $26 a year in new sales tax on his cigarettes.

While he could switch on cable television for some diversion, he might not want to. Cable television also would be taxed for the first time. Cost next year: about $13.20.

There is some good news in the Linowes package for the Potomacs. In exchange for all the new aid the package would generate, the state would require local governments to reduce their property-tax rates. The commission projects that Montgomery County's rate would drop 11 cents, saving the Potomacs $110 on their $250,000 house.

Back in Baltimore, the Patapscos would realize a savings of $140 on their property tax bill, thanks to a 58 cent reduction in the city's tax rate, according to the Linowes plan.

On the other side of the ledger, their car, a 1987 Chevrolet worth $3,000, would be subject to a $60 personal property tax.

Mr. Patapsco, a teacher, makes $35,000. Mrs. Patapsco, a secretary, makes $15,000. Under the Linowes plan, their state and local income taxes would drop $144, to $2,389.

While Mr. Patapsco would also pay the new tax on his daily pack of cigarettes, he and his wife would escape the tax on many services, such as cable television and lawn care, because they don't have a lawn and they don't feel they can afford cable TV. Mrs. Patapsco's trips to the beauty parlor would be taxed for the first time, though, as would repairs to their car and household appliances. Estimated new sales tax paid: $105.

They also would pay about $52 more in sales tax on things that are already taxed, such as clothes and toys, thanks to the proposed increase in the sales tax. The Patapscos' total estimated sales-tax increase: $157.


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