Governing in tough times

January 10, 1992

It is not easy running a government in tough times, Gov. William Donald Schaefer told the General Assembly yesterday. Having already chopped $1 billion in expenses, Maryland still has a $1.2 billion shortfall. This means at least $500 million in more cuts and $700 million in new taxes. That's not a popular message, but Schaefer had an obligation to offer a realistic remedy -- and he did.

"Government cannot just close up when things get tough," he said in his sixth annual State-of-the-State address. Demand from the needy is growing even as tax revenues continue to decline. That means more belt-tightening, but also more tax increases. ,, The government's obligation to the poor and the downtrodden cannot be ignored.

The Schaefer plan relies on broadening the sales tax by eliminating exemptions in the law and extending the tax to many services not now covered, such as beauty shops, car repairs and data processing. Other tax increases on corporations, cigarette, alcohol and gasoline were also proposed. It is an ambitious plan necessitated by the state's dire fiscal straits.

Will legislative leaders courageously endorse the governor's plan? Probably not. They are working on their own approach, which could include many of the steps favored by Schaefer. Reaction to the tone of the governor's speech was positive, though not many lawmakers were willing to endorse his call for more taxes right away.

They will be forced to act, though, in the coming weeks. A $1.2 billion gap can't be closed through budget cuts alone without decimating aid to county governments and Baltimore City and closing entire state agencies. School aid, in particular, would have to be chopped. That's a course few legislators are likely to follow. The "T" word (for taxes) is the logical way out of this dilemma.

Studies by both the governor and the legislature show that Maryland's sales tax has been severely handicapped by a profusion of exemptions that have robbed tax collectors of hundreds of millions of dollars. Exacerbating the problem has been the shift in Maryland from a manufacturing economy to a service economy: Services in Maryland are immune from the sales tax.

Now is the time for legislators to reform the sales tax so it is an efficient and fair revenue-raiser. The governor has given his backing to this undertaking. It is also one favored by House Speaker R. Clayton Mitchell and other tax leaders in the General Assembly. No one likes to raise taxes, but the sales tax plan put forward by the governor yesterday seems the best way to close the budget gap, a gap that will remain even after the next round of spending reductions.

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