Tax Plan To Cut Rates For County But Sales And Income Tax Would Rise Under The Plan

November 29, 1990|By Samuel Goldreich | Samuel Goldreich,Staff writer

A statewide tax reform proposal unveiled yesterday could boost aid to county schools by almost $31 million next year and cut the property tax rate by 14 cents.

But the measure -- billed as a redistribution of Maryland's wealth -- was both questioned and condemned here yesterday amid concern that Anne Arundel residents would pay more taxes to support improved services for poorer localities.

In the first comprehensive overhaul of the state system since 1967, the Maryland Commission on Taxes and Tax Structure recommended a package of reforms that would raise $807 million in new revenue, most of which would be reserved for transportation and education aid to local governments.

"A state with a triple-A bond rating deserves a triple-A quality of life," said Montgomery County attorney R. Robert Linowes, chairman of the commission created three years ago by Gov. William Donald Schaefer. "But we must have the revenue to pay for it."

The commission's proposals include: * Increasing the sales tax from 5 percent to 5.5 percent and broadening it to include services like car repairs, haircuts and lawn care.

* Boosting income tax revenue by 2 percent.

* Imposing a 2 percent tax on cars and boats.

* Raising the corporate income tax from 7 percent to 7.5 percent.

The plan would give the state $345 million in additional revenue and local governments would get $462 million in return for cutting their property taxes.

Anne Arundel County could expect to gain almost $35.4 million in state aid in return for cutting the property tax rate 14 cents for fiscal 1992, which begins July 1.

The entire package was conceived as an effort to both help Baltimore City and the 12 poorest counties improve education and other services, and lessen the tax burden throughout the state for low-income and moderate-income households.

A centerpiece of the plan unveiled at the State House yesterday would create new progressivity in the state income tax, under which any income over $3,000 is currently assesed at the rate of 7.5 percent. The commission proposed boosting revenues $100 million by increasing the number of steps in the tax schedule, with income over $17,000 taxed at 8.75 percent.

With changes in deductions and tax breaks for the poor, two-thirds of taxpayers statewide -- those with household incomes less than $40,000 -- would get lower bills.

But local concern centered on that wealthier one-third, because more than half the county's households have incomes in excess of $45,000.

That places most Anne Arundel taxpayers among the wealthy who would subsidize Baltimore City and the other poorer areas, said assistant county budget officer Steven E. Welkos.

Local anti-tax leader Robert C. Schaeffer said that the proposed trade-off between property taxes and other taxes does not make the system any fairer.

"I'm hard-pressed to find the equity in that," he said. "Any time you talk about redistribution of wealth in any form, I get nervous. That's socialism."

That's an argument that will surely be heard in the General Assembly, if, as expected, the governor embraces the Linowes plan, said state Sen.

Michael Wagner, D-Ferndale.

"If it's a net loss (to Anne Arundel), I'm sure there's not going to be a hell of a lot of sympathy for it," said Wagner, who sits on the Senate Finance Committee.

With many new legislators winning election on anti-tax platforms, he predicted that the Linowes plan might be studied at length and substantially revised or shelved for another year.

Although Wagner said the graduated income tax could win passage as a way to relieve the burden on property taxes and make the wealthy pay more, he added, "The $40,000 wage is just not that extravagant any more."

Incoming county executive Robert R. Neall could not be reached for comment yesterday but an aide said he opposes the plan.

"None of his comments on the Linowes commission were printable," said David Almy, Neall's deputy chief of staff.

Passage of Linowes will require a strong sales job by the governor on "doing the responsible thing," Wagner said.

But at least one local official -- outgoing County Councilwoman Carole Baker, D-Severna Park -- was convinced yesterday of the commission's logic, even if it might mean wealthier county taxpayers would be supporting their poorer neighbors in Baltimore City.

"We have a symbiotic relationship with Baltimore City," she said, citing cultural and economic interdependency between the two areas. "If Baltimore continues to flounder and fails, we would be damaged."

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