Redistributing the wealth?

December 30, 1990|By C. Fraser Smith | C. Fraser Smith,Fraser Smith covers Maryland politics for The Sun.

Several weeks before the November election, House of Delegates candidate John Morgan read in the newspapers that R. Robert Linowes had previewed his commission's new tax proposals during a meeting of the Maryland Chamber of Commerce.

Mr. Linowes appeared on a panel entitled "Redistributing the Wealth."

Chamber planners may have been indulging in a bit of sarcasm here. But Mr. Linowes, the chairman of a tax study commission, had no concern that the label would be inflammatory. Even in the waning days of what he called "the Reagan bull - - - -," he assumed that the idea of a redistributive tax system was a well-settled principle of life in the United States.

Not according to Mr. Morgan, a Howard County Republican who won a seat in the House of Delegates.

"It struck me as absurd," he said. "I thought we had abandoned all of that. Welfare isn't working. People don't think redistributing the wealth is a good idea."

Mr. Linowes thinks redistribution is a very good idea. His commission has recommended new and increased taxes sufficient to bring in a cool $800 million a year. Property taxes would be cut across the state by more than $200million as well.

The Linowes commission called for boosting the sales tax by a half-percent to 5 1/2 percent -- and sending all the money to school districts. "Money is not the answer by itself," Mr. Linowes said, "but without money there are no answers."

The commission also proposed adding an annual tax of 2 percent on the value of personal property, particularly automobiles and boats.

And the commission wanted the income tax adjusted so that higher-income Marylanders picked up much of the burden from the working poor and the middle class. The income tax would be adjusted upward by as much as 15 percent for adjusted gross income of more than $200,000 and gradually reduced for adjusted gross incomes under $40,000.

Tax systems are inherently redistributive, of course. The society pools resources to build a school, dig a well or send men to the moon. It provides for widows and orphans. It cares for the catastrophic incursions of illness. All of this it does as a matter of course -- influenced by its collective humanity and sense of fairness.

Nevertheless, the idea that money would be collected from the relatively well-to-do and given to the poor has always been regarded in some quarters as subversive -- socialistic or even communistic. In 1894, when Congress passed the first peacetime income tax in the United States, newspaper editorial writers glimpsed the end of the Republic. The Washington Post at first called it "an abhorrent and calamitous monstrousity" that "represents a repudiation of the spirit as well as the letter of Democracy. It punishes everyone who rises above the level of mediocrity."

The New York Times was initially hostile as well. "When men get in the habit of helping themselves to the property of others they are not easily cured of it," the newspaper said.

According to a survey of editorial opinion by Marvin Olasky, a professor of journalism at the University of Texas at Austin, other newspapers supported the new tax as a way to retire the nation's alarming 1894 deficit of $89 million.

The Post eventually changed its editorial mind. The new levy took on almost biblical powers and was called "a rock of credit from which abundant streams of revenue will flow whenever Congress chooses to smite it." After a few false starts, the income tax was approved finally in 1913 when Wyoming became the 36th state to ratify the 16th Amendment, which allowed Congress to tax incomes "from whatever sources derived."

In the name of various economic and social policies, Congress has been smiting the rock ever since. Now the Linowes commission would take its licks -- if the legislature were not standing in the way.

Like the Linowes commission in Maryland today, federal legislators who supported the new tax said their mission -- apart and aside from raising revenue -- was fairness. "The problem," according to Thomas V. DiBacco, an American University historian and tax expert, "was blending equity with the congressional disposition to give and take when crafting legislation."

At some point, "fairness" was equated with the concept of a graduated or progressive income tax -- the idea that money should be extracted more liberally from those who had more of it. That concept lacked universal endorsement, but it became a part of the tax landscape -- or had been until what Mr. Linowes calls "the Reagan bull - - - -." He is referring to the lowering of tax rates from the 70 percent range to 28 percent (recently pushed up to 31 percent).

But John Morgan says Mr. Linowes' idea of bull is out of step with the voters. A 26-year-old semiconductor engineer at the Johns Hopkins Applied Physics Lab, Mr. Morgan ran against the idea that Mr. Linowes and his fellow commissioners were about to reach deeper into the pockets of some Marylanders.

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