Deficit goes to $220 million governor backs tax increase Schaefer goes public, reluctantly, for a tax rise.

December 06, 1991|By William Thompson | William Thompson,Evening Sun Staff

For the first time since the General Assembly stymied his ambitious plan to raise $800 million in new revenues last winter, Gov. William Donald Schaefer has gone public -- although reluctantly -- with his support for raising state taxes.

"I'm going to do it. I have to do it. There isn't anybody else," Schaefer said yesterday after a meeting in Baltimore, where he was told the state budget faces yet another shortfall.

The state Board of Revenue Estimates said Maryland will have TC deficit of $220 million in the fiscal year that ends next June.

Schaefer publicly revived the notion of increasing the state sales tax as one way to raise money.

Some lawmakers have suggested increasing the sales tax from 5 percent to 6 percent, which would bring in $300 million annually.

Schaefer said he is willing to consider such an increase, but only if "exemptions [to the tax law] are cut out." Many goods and services are not taxed in Maryland under current law.

"That's my first reference to a tax," Schaefer said, adding that now he expects to be accused of wanting to spend more money.

"Yep," he continued, "I want to spend some money on those who can least afford to have their money cut, like GPA [General Public Assistance], the homeless, the retarded."

Hours later at a public meeting on the Eastern Shore, scores of people applauded when the call to raise and restructure taxes was made by one speaker after another.

A legislative panel had taken its review of public sentiment on state spending to a road show at Chesapeake College near Wye Mills. Opponents of higher taxes also turned out for the meeting but apparently were out-organized and outnumbered by those in favor of increasing taxes.

Schaefer said he is not eager to push for taxes because "this is not the right time."

Lawmakers who killed Schaefer's tax package during the 1991 session are conducting their own tour of the state, soliciting public opinion about how the government raises and spends revenues.

Many of those who have spoken in favor of raising new taxes have been either workers in programs that have been affected by tax cuts or lobbyists paid to represent them.

Lawmakers say they plan to return to Annapolis and, with public sentiment fresh in their minds, put together a proposal to address the state's fiscal problems. Opposition to new taxes is strong among lawmakers, and observers say there is not yet a majority vote to approve new tax increases.

Schaefer insisted that the Maryland public has not yet grasped the significance of the state's money woes.

"The general public doesn't believe us," he said. "They just don't believe we're in the position we're in."

At the Baltimore meeting of the BRE, a three-member panel that releases periodic reports on the state's economic condition, the budget news was about as bad as it gets. But Schaefer has been bracing himself for the grim economic forecast for weeks.

Told that the 1992 state budget faces yet another $220 million shortfall, Schaefer leaned back in his chair and said: "I'm not down. For the first time, I'm optimistic. People will say, 'He's crazy.' I'm not."

Besides about $1 billion in state spending that he already has either cut or shifted during the past year, Schaefer said he is preparing to cut another $175 million to balance the general fund budget by the time the fiscal year ends June 30.

Schaefer, who in 12 months has become a veteran budget-slasher with five rounds of cuts under his belt, declined to talk about specific cuts, but he noted that state spending is greatest in education, health and housing.

At a meeting of county officials in Hagerstown, Fred Puddester, deputy budget secretary, said that less than half the cuts will come out of state aid to local governments.

The Associated Press contributed to this story.

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