Advocates for the poor propose tax increases Republicans seek hold on spending

December 20, 1991|By Sandy Banisky | Sandy Banisky,Annapolis Bureau of The Sun

ANNAPOLIS -- On the heels of a national study citing Maryland as one of the states cutting deepest into poverty programs, advocates for the poor yesterday proposed tax increases to raise nearly $700 million, restore some aid and fend off future cuts.

The plan, drafted by the Maryland Alliance for the Poor, includes raising taxes on incomes over $50,000, increasing corporate taxes and levying sales taxes on such personal services as dry cleaning, cable television and health club services.

"We are appalled and ashamed that Maryland ranks among the seven worst states" in cutting programs for the poor during the recession, said Lynda Meade of Associated Catholic Charities, referring to a report released Wednesday by the Center for the Study of the States.

But tax increases are not a budget-balancing option for Annapolis Republicans as the state faces a deficit projected at $1.1 billion over the next 18 months.

A few hours after the Maryland Alliance for the Poor report was released, Republicans weighed in with a budget proposal that House Minority Leader Ellen R. Sauerbrey, R-Baltimore County, says can hold spending next year to current levels and thus avoid any tax increase.

"There is a public perception being created that there is no way tTC to solve a $1.1 billion budget deficit other than a tax increase," DelegateSauerbrey said. "I'm saying that's smoke and mirrors, scare tactics."

Asked about the Maryland Alliance for the Poor's tax-increase proposal, Ms. Sauerbrey said, "The worst thing we can do in a sick economy is raise taxes. We have built a structure of state government we cannot afford."

But the Maryland Alliance for the Poor contends some of that government structure must be preserved to protect impoverished Marylanders, particularly children and the elderly.

If all the proposed changes were adopted, the package would increase state revenues nearly $625 million in fiscal 1993 and direct another $72.4 million to local governments, which have been hit hard by cuts in state aid.

Of the $700 million in new revenues, the alliance proposes using $200 million to restore programs for the poor that Governor Schaefer has cut as he tries to keep up with growing deficits.

The rest of the money would be used to protect against cuts in the next budget year.

The proposal includes increasing taxes from 5 percent to 5.5 percent for people with incomes from $50,000 to $100,000; to 6 percent for taxpayers with incomes of $100,000 to $150,000; and to 7 percent when incomes are over $150,000.

Corporate income taxes would be raised from 7 percent to 7.5 percent. Taxes on beer, wine, liquor and cigarettes would also go up.

The alliance suggests providing a sales-tax credit of $100 for households with incomes of less than $20,000. It would not increase sales taxes but would expand their application to an array of services -- from dry cleaning to lawn care, from security services to telephone-answering services.

"This is an equity proposal," said David Falk, a former aide to Governor Schaefer who is serving as an adviser to the alliance. "This is a progressive tax proposal" that does not increase taxes on those least able to pay.

Delegate Sauerbrey, however, believes the state could manage its funds better and avoid raising taxes.

But Frederick W. Puddester, deputy secretary of the Department of Budget and Fiscal Planning, disputed her proposal, saying the figures on which Delegate Sauerbrey based her projections are outdated.

Governor Schaefer already has eliminated the proposed pay raises to which Ms. Sauerbrey objects, Mr. Puddester said.

"Ellen's complaint is that we built in a bunch of frills to build up the number" used in projecting the deficit, Mr. Puddester said. "The governor's already cut $500 million, including the pay raises."

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