Schaefer says higher taxes are necessary

August 25, 1991|By C. Fraser Smith | C. Fraser Smith,Sun Staff Correspondent

OCEAN CITY -- Gov. William Donald Schaefer warned yesterday that Maryland's budget crisis is so severe it can only be resolved by increasing taxes. And he urged legislative leaders to convene a special General Assembly session to do just that.

The governor said that he will not wait forever for the assembly to act but that he would need the approval of legislative leaders to call a special session. He said that such a session is urgently needed.

Less than two months into the current budget year, the state government faces a $300 million deficit -- and Mr. Schaefer said that figure is likely to grow. Legislative and Schaefer administration financial experts agree that the budget year that begins July 1, 1992, will bring even harder times, with a projected shortfall of $700 million.

Pressure on the legislature to increase revenues is also coming from recent studies by General Assembly committees and their fiscal analysts that concluded that the economy will not rebound quickly enough to solve the problems and that state programs cannot be reduced sufficiently without serious harm to basic services such as aid to education.

Mr. Schaefer said that other legislators must now say if they agree or disagree with Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee. Mr. Levitan said Friday that he believes new taxes must be passed in a special session in November so that additional revenues can be collected beginning Jan. 1. Otherwise, he said, the hole in the budget cannot be filled.

The governor has occasionally seen Mr. Levitan as a legislative foe. But yesterday the governor hailed the senator's "courage."

The governor said he agrees with Mr. Levitan's call for a special legislative session in November, "sooner if possible," the governor said.

The individual legislator, he said, will have to make a choice between fear of voter opposition to higher taxes and recognition of the state's financial needs.

"He's got to make a decision if he's going to do the right thing," Mr. Schaefer said.

Mr. Schaefer declined to say which taxes he would raise, but he recalled that he has supported increases in virtually all of the basic levies -- including sales and property taxes.

"The longer you wait, the harder it gets," the governor told reporters after a speech to the Maryland Association of Counties meeting in Ocean City.

However, House Speaker R. Clayton Mitchell, D-Kent, said that it is too early to decide if increased taxes are needed. The House Ways and Means Committee is continuing its study of various state formulas that control aid to local governments, about 60 percent of the state's budget.

"If you just look at the state's revenue figures," Mr. Mitchell acknowledged, "it doesn't look good." But he said that the legislature could reduce the amount of state aid it provides while giving county governments the authority to increase local taxes.

One local levy that has been considered is the so-called piggy-back tax, which is a 2.5 percent tax on income collected by the state and returned to local governments.

Mr. Schaefer, still annoyed that General Assembly leaders were not willing to follow his lead earlier, said that he would not wait forever for the legislature to act.

"At some point we will do it. I will meet my responsibilities," he said.

The governor recalled that his own tax-study panel, headed by Montgomery County lawyer R. Robert Linowes, had made a two-year study of Maryland's tax system and of many options for changing it.

"I sent them a full legislative tax proposal," Mr. Schaefer said. "OK, they rejected that. . . . They took it away from me. I'm waiting for their proposals. The problems haven't changed."

Having taken the political heat for advocating taxes against the tide of voter opinion, Mr. Schaefer has said that he is relinquishing the role of political lightning rod.

"I'm waiting for them," he said.

Mr. Schaefer said that he is convinced a summer-long legislative investigation of spending practices in state government had uncovered no pockets of "fat." Last week, one of the study committees recommended relatively small cuts.

The reality, Mr. Schaefer and others are saying, is that big programs, such as aid to education, will have to be reduced if taxes are not raised.

After the governor's speech, Howard County Council Chairman C. Vernon Gray said that he would be willing to support higher taxes -- if the counties are part of the process.

Calvert County Commissioner Joyce L. Terhes, who is chairman of the Maryland Republican Party, said that she would not be comfortable supporting new taxes until she is convinced that all of "the fat" has been cut.

The call for new taxes by Democrats, she said, "just makes it better for me in 1994," the next gubernatorial election year. "We can paint 'em all with the same brush strokes."

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