2-word message: More taxes $90 million package needs governor's OK.

March 29, 1991|By Jon Morgan | Jon Morgan,Evening Sun Staff

A General Assembly that began business in January with many members pledging no new taxes has some bad news for Maryland smokers, cafeteria patrons and investors: nearly $90 million in new taxes.

After weeks of cutting, trimming and shuffling funds between agencies, negotiators for the House of Delegates and Senate reached a compromise yesterday that calls for $89.2 million in new taxes for the fiscal year beginning July 1.

Taxes on cigarettes would go up about 10 cents a pack. And several items that few people knew were exempt from sales taxes, such as some carryout meals and "to-go" beverages sold in cups, would lose their exemptions.

And the state's income tax break on capital gains -- profits from the sale of stocks, bonds and real estate -- would be phased out.

The measures were formally endorsed yesterday by a joint House-Senate committee and are expected to win easy approval by the full legislature. They then would be sent to the governor for his signature.

Aides to Gov. William Donald Schaefer say he has not decided whether to support the package, but they point out that most of the taxes and new spending had been requested by him during the session. Lawmakers said that, if Schaefer vetoed the tax measures, they would come back in special session in the summer to override his veto.

The final package includes about $15 million more in taxes than either the House or Senate voted for several weeks ago. Negotiations were scheduled to resume today about how the extra money would be spent, but a leadership plan sketched out yesterday calls for Baltimore to get $9 million and the Developmental Disabilities Administration to get another $5 million for programs for the disabled.

"We tried to do what was best for Maryland," said House Speaker R. Clayton Mitchell Jr., D-Eastern Shore, a leading opponent of new taxes.

"It is a compromise on everybody's side; everybody has looked long and hard at this thing," said Sen. Laurence Levitan, D-Montgomery, chairman of the Senate Budget and Taxation Committee.

The only dissenting vote on the six-member committee came from its sole Republican, Sen. John A. Cade of Anne Arundel County, who declared it an "over-taxation for the people of Maryland."

Cuts in next month's welfare grants threatened by Schaefer would be averted under the plan by having the cigarette and food taxes go into effect June 1, raising an additional $5.8 million in the final month of the fiscal year.

The proposed new taxes are:

*An additional 3 cents-a-pack tax on cigarettes, on top of the current 13-cent excise tax. Also, cigarettes would become subject to the state's 5 percent sales tax. Efforts to extend the sales tax to cigars, snuff and other tobacco products failed.

The extra cigarette taxes would raise about $47 million in fiscal 1992.

*Carryout meals and prepared food costing less than $1 also would become subject to the 5 percent sales tax.

Decades ago, lawmakers excluded from taxation meals costing less than $1 in an effort to make more affordable the "working man's lunch." Carryout meals purchased in restaurants without customer seating are also free from the tax now, as are beverages sold "to go" in cups. All those items would be taxed under the compromise plan.

In fiscal 1992, the food tax would raise an estimated $10.2 million.

*A phaseout of the state's capital gains tax break, culminating in its elimination by Jan. 1, 1992. The phaseout would net the state $32 million in fiscal year 1992.

For 1991, during the phaseout, individual taxpayers with incomes of $50,000, or $100,000 for joint filers, would be entitled to exclude from taxation 30 percent of the first $25,000 in capital gains.

That 30 percent exclusion would be reduced on a sliding scale for wealthier taxpayers and would be eliminated, effective July 1, for individuals making $65,000 and joint filers making $130,000.

Currently, 40 percent of capital gains income is exempt from taxes. About 7 percent of the state's taxpayers claim a capital gains break.

Meanwhile, the House Appropriations Committee voted to endorse part of three economic development items in Schaefer's capital budget request.

The House recommended all of the $1.8 million Schaefer requested for the Christopher Columbus Center at the Inner Harbor, $850,000 of the $2 million he requested for the Baltimore Convention Center expansion, and $1.5 million of the $2 million he requested for a proposed bio-processing center in Baltimore.

The recommendations, along with dozens of others made yesterday, must be voted on by the full House and the Senate.

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