Governor's State-of-State speech includes "solution."

SCHAEFER SAYS: RAISE TAXES

January 09, 1992|By John W. Frece | John W. Frece,Evening Sun Staff

Gov. William Donald Schaefer said today the state can no longer ignore its financial problems, and he proposed a sweeping increase and expansion in state taxes and fees.

In his annual State-of-the-State address to a joint session of the -- General Assembly, Schaefer said he was finally going to propose the comprehensive "solution"to the state's fiscal crisis that his critics have been clamoring for.

Among his major initiatives:

* A vast expansion of the state sales tax to such services as dry cleaning, beauty parlors, barbers, car phones, cable television, car repairs, data processing, prepared food and precious coins. But the governor said he hopes to keep the sales tax rate at its 5 percent level.

* A nickel-a-gallon increase in the state's 18.5-cents-a-gallon gas tax.

* A graduated income tax that shifts the tax burden more to wealthier taxpayers.

* A $40 million increase in various fees charged for government services.

* An increase in the corporate income tax rate from 7 percent to 7.5 percent.

* A reduction in state aid that flows to Baltimore and the 23 counties, which would be offset by giving authority to the local governments to raise their piggyback income tax rate from the current maximum of 50 percent to 60 percent. Specifically to help Baltimore, the governor proposed that 5 percent of the piggyback tax proceeds be returned to the jurisdiction where the money is earned rather than where the taxpayer lives, a help to centers of employment such as the city.

* A 25-cent tax increase per pack on cigarettes and other "sin tax" increases for liquor, wine and beer.

"Don't be afraid of new directions," Schaefer told politically nervous members of the General Assembly. "Don't be afraid to step out and make a tough decision."

He said Maryland had been a national leader when times were good and said, "Let's be a leader in these times, as well."

The governor's tax proposals are intended to provide a way to eliminate as much as $700 million of a $1.2 billion deficit projected for fiscal year 1993. Schaefer intends to submit a budget to the legislature that will already have been reduced by the remaining $500 million balance.

However, the governor endorsed the full $184.4 million increase in state aid for education that is currently mandated in state law. Without providing details, he also said he hoped to extend the length of the school day.

Although the governor's tax proposals were clearly the highlight of his annual address, he proposed other programs as well, including:

* Turning the Baltimore Zoo into a state park, which would relieve the city of financial responsibility for the zoo.

* Combining the Maryland Stadium Authority and the Convention Center Authority. The city of Baltimore would continue to finance operations of the convention center, but the Stadium Authority -- which Schaefer has high regard for -- would run it.

In the area of housing, the governor proposed shifting the payment of recordation taxes from buyers to sellers, hoping that would reduce closing costs and make it easier for people to buy homes. He also proposed allowing property taxes to be paid on a semi-annual basis, again to reduce closing costs.

Schaefer reiterated his plans to seek a ban on certain assault weapons, to seek a way to keep loaded guns away from children, and said he will propose a domestic violence bill intended to help people who have been abused by their mates.

"Now . . . is the time to be bold!" the governor said. "To be progressive. To look beyond today. For this, too, shall pass!"

I= The governor warned that without an infusion of cash, the

state could lose its momentum in higher education. "The stakes are higher this year," he said. "We can't ignore the problems."

Schaefer reminded the General Assembly that he proposed a major tax restructuring bill -- one that would have raised more than $800 million in the first year alone -- last session, but it never was seriously considered by the legislature.

"I don't get any satisfaction out of the fact that one year ago, I stood here and warned that we were headed for trouble," he said.

Since then, he reminded the lawmakers, the state has been forced to eliminate more than 5,000 mostly vacant jobs, cut $1 billion out of planned spending, and eliminated or reduced programs that help Maryland citizens, especially the poor.

"For more than a year, we've just barely met our needs," he said. "We've done the minimum we can do for people. We've taken from one area to prop up another."

But Schaefer also warned the lawmakers that if they do not join him in a solution to fill the $700 million gap with additional revenue, he will have no alternative but to cut deeply into the budget, including education, health, housing and public safety programs.

What might rise?

.`

* Expand the state sales tax

* Raise the gas tax

* Create a new graduated income tax

* Raise fees for governmental services

* Raise the corporate income tax rate

* Raise taxes on liquor, wine and beer

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