Yes New Taxes!

March 31, 1991

As President Bush taught us so well, the trick is not to read the lips of politicians but to watch what they do. Throughout this dismal session of the General Assembly, the lawmakers in Annapolis have been positively Bushesque in muttering the mantra of "no new taxes." But like the president, and indeed even more than the president because they have to adhere to a balanced budget, they had to renege. And they were right to renege.

Now the motto is "yes new taxes."

The $89.2 million tax package apparently on the way to passage may be just a down-payment on what the governor and the legislature will have to do next year. But this cannot disguise the irony that the General Assembly is enacting the largest general revenue leap upward since 1978, when the sales tax went up by $128 million.

If you add in the $42 million in Department of Motor Vehicles fees that may be approved, the total "revenue enhancement" rises to $132.2 million -- a sum surpassing 1978 in nominal if not in real dollars. This suggests the political fraternity is starting to come to terms with the stark arithmetic of a harsh recession, which made mincemeat of revenue projections, and the continuing needs of a society awash in problems that must be faced.

As the year began, the General Assembly received the Linowes Commission report on how public funds should be raised and spent more equitably and efficiently. But its $800 million price tag made the pols fear for their incumbency. So they ostensibly rejected Linowes as part of a wholesale revolt against Gov. William Donald Schaefer.

As the deadline arrives tomorrow night for enacting a balanced budget, a first installment on Linowes is on view. House and Senate conferees have approved a package that will increase taxes on cigarettes by $47 million and impose taxes on take-out meals and "to-go" beverages by $10.2 million. Both of these were recommended in the Linowes report. In addition, the conferees approved a phasing out of the Maryland tax break on capital gains, which would hike revenues by $32 million.

Despite Governor Schaefer's objections that the capital gains change would boost piggyback revenues to the wealthiest subdivisions and thus increase disparities between rich and poor parts of the state, the phase-out is a sound tax policy step toward treating all income alike.

Governor Schaefer should accept the tax package even though it produces only $10 million on a one-shot basis for financially strapped Baltimore city. This is about the best than can be gleaned from the worst legislative session of the Schaefer era. Having brought so many troubles on himself, the governor would be wise to accept -- even welcome -- the inevitable rather than fulminate against it. Before the 1992 session, the legislature should thoroughly study Linowes, look at revenues in the light of prudent spending projections and then come up with a plan that can influence and improve the next Schaefer budget.

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