$200 million tax plan pushed by Steinberg Budget woes prompt 'interim' proposal

February 14, 1991|By Peter Jensen and John W. Frece | Peter Jensen and John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- Lt. Gov. Melvin A. Steinberg, the Schaefer administration's chief legislative strategist, said yesterday that he is attempting to develop support for a $200 million "interim" tax plan to solve budget woes at both the state and local government levels.

Mr. Steinberg said the package would draw from some of the elements suggested by the Linowes commission tax-restructuring plan but would leave most of the commission's controversial findings for interim study until the 1992 General Assembly session.

But even as Mr. Steinberg was describing his plan late yesterday afternoon, members of House and Senate budget committees were meeting privately to discuss ways to trim more than $200 million from the $11.6 billion budget Gov. William Donald Schaefer submitted to them two weeks ago.

The legislative plan would -- at least for now -- avoid any new taxes. Instead, House and Senate leaders reviewed two lists of government programs they could consider for cutbacks. Many major and politically sensitive programs were on the list, including higher education, parkland acquisition, and a long list of local aid programs, including the "APEX" education aid program.

Senators and delegates alike said they were in total agreement to reject Governor Schaefer's plan to balance the budget with a $76 million transfer from the state's already depleted Transportation Trust Fund. But that decision means the money will have to be made up elsewhere, either through cuts or taxes.

House Appropriations Committee Chairman Charles J. Ryan, D-Prince George's, said taxes would become a possibility only if the "pain" of the proposed cuts becomes too great for legislators and their constituents.

If that happens, he said, an estimated $74 million could be raised by applying the sales tax to cigarettes, increasing the state's telecommunications tax, and by closing a variety of loopholes in the state's sales tax, including exemptions now granted for certain snack foods.

Mr. Steinberg said yesterday that he, too, was trying to build support for closing the sales-tax loopholes as well as to boost the tax on cigarettes "and other luxuries." But he also called for an expansion of the sales tax to selected services such as auto repair and legal fees.

"Personally, I wouldn't be disappointed if the [Linowes] package is sent to summer study," the lieutenant governor said yesterday. "But it would be tragic if we fail to enact legislation that could develop additional revenue addressing the central issues to this state: education, transportation and aid to local subdivisions."

Mr. Steinberg and the legislators said they were developing their respective plans because they anticipate another sharp drop in state revenues will be announced when the state's Board of Revenue Estimates meets Feb. 25. That additional deficit has already been estimated to be as high as $135 million.

Mr. Steinberg's acknowledgment yesterday of efforts to seek a compromise tax plan represented a major shift for the Schaefer administration. In the past, Governor Schaefer and the administration's top aides have said only that the legislature should pass the entire $800 million worth of recommendations this year.

Paul E. Schurick, the governor's spokesman, said, "The governor has said he supports the entire Linowes package. The governor has tasked the lieutenant governor with the job of seeing the [administration's] bills through the legislature. That's all I'm going to say."

However, legislative opposition to many of the elements in the Linowes package and continued concern that the General Assembly had too little time to consider the comprehensive proposal seemed to spell doom for tax legislation even before it was unveiled Monday.

In addition to an expanded sales tax, the Linowes report recommends a variety of new taxes and tax-reform measures intended to make Maryland's system of taxation fairer and provide greater resources to such basic government services as public schools and transportation.

Among the most controversial of the report's recommendations are a 2 percent personal-property tax on motor vehicles and boats. It also calls for increasing the sales tax to 5.5 percent and raising the tax on corporations.

Mr. Steinberg said the bill developed from the Linowes report is "such a comprehensive bill, it certainly requires more input from the citizens of the state." He questioned whether it was "good legislative policy" even to attempt to pass a Linowes bill during the current 90-day session.

Instead, the lieutenant governor said he is lobbying county-level elected officials as well as legislators to reach a consensus over what new taxes might be acceptable to them.

Mr. Steinberg described the $200 million as a "ballpark figure" that will be adjusted once the Board of Revenue Estimates delivers its next report.

He said he favors first determining what the state will need to meet basic education, transportation and aid to subdivisions before finalizing how the state will raise the money.

"There's no doubt in my mind we have to come to grips with restructuring the tax structure in this state," Mr. Steinberg said. The Linowes report "is a starting point."

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