Tax increases looming, county leaders warned Levitan appeals for support at O.C. convention

August 24, 1991|By C. Fraser Smith | C. Fraser Smith,Sun Staff Correspondent

OCEAN CITY -- Higher taxes for Marylanders loom just beyond the financial horizon, one of the state's most influential fiscal leaders and the governor's chief budget officer warned county leaders here yesterday.

A 1 percent increase in the sales tax, an income tax surcharge, a higher local income tax or a combination of these levies will be needed -- and the legislature will have to meet in special session soon to get the new revenue flowing, said Senator Laurence Levitan, D-Montgomery, one of the legislature's most influential fiscal leaders.

The senator appealed to members of the Maryland Association of Counties for support. Legislators remain paralyzed by fear of voter retribution, he said. They will need "strong backing" to do what is best for the state, he said.

"The longer we wait," he said, "the harder it will be." He suggested a November special session so that the new laws could be in place by January 1, 1992 -- in time to give the state six full months of collecting at the higher rates in the current fiscal year.

Mr. Levitan said that increasing the sales tax from 5 percent to 6 percent would raise $150 million in six months. Since that amount will not cover the deficit, now estimated at $300 million -- and likely to grow -- additional levies will be necessary.

A one-time surcharge on the income tax might be one way to go, he said, without offering a figure. Additional revenue could be raised by taxing goods or services that are not taxed now, he said.

The legislature might also increase the percentage of income tax paid by wealthier Marylanders or permit counties to increase the so-called piggyback tax, a 2.5 percent tax added to the state's 5 percent income tax, he said.

The senator's comments came one day before Gov. William Donald Schaefer is scheduled to address the county leaders who are holding their annual convention here.

Government finance will be on his mind as well, his aides say. The governor has spoken to other legislators informally of his own belief that a special tax-raising session may be needed in November.

Without offering any specifics of the administration's approach, Budget Secretary Charles L. Benton Jr. asked the county officials to begin preparing their constituents for a bigger tax bite.

"I have looked at a number of the messages county executives include with their budgets, and I have yet to find one that says these [services are provided] because of money the state provides," he said. About a third of the state's $11.9 billion budget goes to county governments in the form of school aid, police and fire aid and other grants.

In recent weeks, all of these aspects of state aid to the counties have been under careful scrutiny in the search for areas that can be cut. State officials say that about $100 million in local aid could be withheld, though where and when the cuts will be made has not been decided.

"We all recognize that raising taxes is a bitter pill," Mr. Benton said. But he said that the need for what he called "revenue enhancements" has not been effectively communicated to the people of Maryland.

During the 1992 legislative session, Governor Schaefer's appeal for a program that would have have raised $1 billion in new taxes was set aside by the legislature.

Mr. Levitan said yesterday that he had favored delaying the tax-increase question because the governor's plan did not adequately address the issue of tax fairness. Now, though, he said, "If he calls us in to talk about how to solve the problem, he'll find responsive legislators."

The Assembly did say when it killed the governor's tax bill that it recognized a need to deal with taxes. At the same time, legislative leaders insisted that they needed to study state spending as well. Several committees have been looking at spending, and while a number of relatively small cuts have been recommended, the real savings appear to lie in reductions of aid to local governments -- the counties -- and higher taxes.

L "We've made about as many cuts as we can," Mr. Levitan said.

Mr. Benton concurred: The state, he said, finds itself pressed to provide more services in times of economic trouble.

Mr. Levitan's appeal was immediately supported by Anne Arundel County Executive Robert R. Neall, who attempted to soften the message with a bit of humor.

The previous evening, he said, he had seen a sign that seemed to offer a variation on the adage about safety in numbers: "If enough people do it," the sign said, "you won't look stupid."

Mr. Neall said that local government officials are caught between contradictory demands of taxpayers: "Don't tax us, but we still want the services," they say.

Mr. Levitan said that he is certain many legislators are not ready to face the fact that taxes must be raised. He said he had gotten a postcard recently with a simple one-line message.

"I said no new taxes," the writer said.

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