Panel tries to pave way to 2% tax on cars, boats

January 06, 1991|By Suzanne Wooton | Suzanne Wooton,Sun Staff Correspondent

ANNAPOLIS -- First of all, Richard Dein wants to set the record straight. Boating is not yacht clubs, 42-foot sailboats and cabin cruisers. It's not fat cats and deep pockets. It's a 20-foot power boat, a fishing pole, a beer or two and a Sunday afternoon on the South River.

But that garden-variety American dream is getting tougher and tougher for the little guy to afford, says Mr. Dein.

Take beer, for instance. The price went up last week with the new federal excise tax. Gas has jumped to $1.30 a gallon, thanks to federal taxes and Iraqis. Boaters face a $25 Coast Guard user fee. And now somebody wants to tax Mr. Dein 2 percent every year on his 20-foot Mako.

Even worse, they want 2 percent on his three cars, too.

The Maryland Commission on State Taxes and Tax Structure -- a gubernatorial commission that spent three years studying the state's tax system -- says it's time Maryland joined the 30 other states that levy a personal property tax on boats and cars every year.

"There's a perception here that everybody wants my money," said Mr. Dein, a 47-year-old marine consultant who is retired from the Coast Guard and lives in a modest neighborhood off West Street in Annapolis.

The personal property tax plan is part of a proposed overhaul of Maryland's tax structure that would alter the income tax burden in favor of lower- and middle-income taxpayers, lower real estate taxes and increase sales taxes. The proposed changes would produce some $800 million in new revenue, which would be used largely to reduce the disparity in spending between richer and poorer areas of the state.

In the past, Maryland has steered clear of an annual tax on cars and boats. But it's a lucrative idea. Registered in Maryland are some 173,000 boats -- mostly under 20 feet -- and 3.3 million cars, buses, trucks and motorcycles. Overall, the 2 percent increase on motor vehicles would raise $374 million next year, and the tax on boats would raise $16 million.

A new source of money is alluring, with major transportation projects such as the Eastern Bypass around Washington, an intercounty connector between Rockville and Prince George's County and more light-rail on the state's wish list.

"There's no question there's a revenue need. The issue is whether a personal property tax is the way to go," said Delegate Timothy F. Maloney, a Prince George's Democrat and chairman of the subcommittee on law enforcement and transportation in the Maryland House.

Politically, he said, the best way to find new money is by raising existing taxes, not by inventing new ones. In fact, the General Assembly this session may be asked to consider proposal to impose a 5 percent sales tax on gasoline, increases in motor vehicle fees or a 3-cent increase in the state's 18.5-cent gas tax.

But the commission, headed by Montgomery County lawyer R. Robert Linowes, says that a property tax on automobiles is a much fairer one.

The tax, the commission says, would be a user tax: The motor vehicle revenues would be earmarked strictly for transportation-related improvements; half would be returned directly to the jurisdictions where people pay them. The boat tax would go to clean up the Chesapeake Bay.

The burden of transportation improvements would be placed on users in a way that reflects their ability to pay, the commission says. At 2 percent, everyone would pay the same rate. But owners of clunkers still would pay far less than those who drive Mercedeses and BMWs.

In effect, the commission believes that if Richard Dein can afford to own his three cars -- a 1984 Oldsmobile station wagon, a 1983 Cadillac and a 1970 Porsche -- then he can afford to pay 2 percent on their value every year.

This year, the Olds is worth $2,125 and the Cadillac $4,275, meaning he'd pay $128 on them -- plus a minimal amount on the Porsche.

Moreover, the commission says, the plan makes the tax system more equitable, forcing owners of tangible property to pay taxes along with real estate owners.

"If the property tax is a tax on wealth, it should be on all wealth," said Jay Ladin, deputy director of the Linowes commission.

But this is Maryland, a sort of holy land for the automobile. It doesn't inspect them every year, it checks for harmful emissions only because the federal government threatened to keep road money, and it has never considered an annual tax on them.

"It's an enormously unpopular idea," said Mr. Maloney. "Most people think their car is a depreciating asset, and they don't want to pay a tax every year plus car payments, insurance and gas."

"Of all the things in the Linowes package, it's the least likely to be enacted."

Traditionally, Maryland derives its transportation money from various fees on automobiles, notably the gasoline tax and the annual $27 registration fee.

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