Tax plan to aid city is ailing Senate president, comptroller oppose redistribution

January 14, 1992|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- A proposal to prop up Baltimore by sending more income tax revenue the city's way appeared in deep trouble last night.

"I wouldn't say it is dead [but] I would say it is ailing," conceded Sen. John A. Pica Jr., D-Baltimore.

Mr. Pica is a sponsor of the plan, also pushed by Gov. William Donald Schaefer, to redistribute some local piggyback income tax revenue to the jurisdiction in which it's earned, instead of where the taxpayer lives.

Before the governor's aides could translate the idea into legislation, it drew fire from Senate President Thomas V. Mike Miller Jr., D-Prince George's. Yesterday, a new and powerful critic chimed in: Comptroller Louis L. Goldstein.

Maryland's veteran tax collector said he has sent letters to lawmakers warning that his office doesn't have the information it needs to redistribute the money. He said his office keeps track of where taxpayers live, not where they earn their money.

Mr. Goldstein also warned that the proposal -- which opponents call a "commuter tax" -- could prompt Washington, D.C., to enact a similar tax on Maryland residents working there.

That, he said, could cost Maryland $200 million a year because the state would have to give residents credit for the taxes they pay to D.C.

"We have successfully fought to prevent Washington, D.C., from imposing a commuter tax ever since the 1960s," Mr. Goldstein said in a press release explaining his concerns.

Meanwhile, Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee, said a group of legislative leaders who are hammering out a plan to eliminate next year's projected $1.2 billion deficit also have essentially ruled out the "commuter tax" idea.

If the proposal dies, Senator Pica said, city lawmakers are ready to offer a substitute that would shift money to the city based on a complicated formula tied to the average per capita income tax generated in each jurisdiction.

Calling it a "disparity grant," Mr. Pica said the plan would reward poorer jurisdictions -- such as Baltimore -- whose per capita income tax is below average.

If the legislature enacts the disparity formula and brings Baltimore up to 80 percent of the state average, the city could get as much as $50 million, Mr. Pica said.

The efforts to help Baltimore are only a small part of the broad tax and budget program legislative leaders are discussing. According to lawmakers involved in yesterday's closed-door meetings, tentative decisions include:

* Cutting $700 million from the fiscal 1993 budget, including reductions in several programs mandated by law.

* Raising $450 million in new taxes and $40 million to $50 millionin fees for various government services.

* Expanding the sales tax to goods and services it doesn't cover now, including dry cleaning and dataprocessing. Legislators disagree over increasing the current 5 percent tax rate. Senator Levitan wants the higher rate, arguing that it will provide an immediate cash transfusion to help erase this year's remaining deficit.

Legislators also discussed adding a new 6 percent bracket to the state income tax schedule for taxpayers earning $100,000 or more, but it was unclear last night whether they agreed on it. The current maximum rate is 5 percent.

When the group makes its final recommendations, the presiding officers of both houses, the governor and the legislature as a whole will have a chance to change them.

Supporters of the original piggyback tax proposal complained yesterday that critics were incorrectly -- perhaps intentionally -- calling it a "commuter tax." They said the public mistakenly believes it will mean they must pay higher taxes where they work.

"I wish people would stop calling it a 'commuter tax,' " Senator Pica said. "They're either saying it because they don't understand it, orthey are trying to kill it."

The piggyback tax itself is a surcharge on state income tax collected by the county in which the taxpayer lives. At the common 50 percent piggyback rate, a taxpayer with a $500 state income tax bill will also pay $250 to the county.

The plan backed by Schaefer would allow counties to collect more than the current 50 percent limit.

But it would divert 5 percent of the first 50 percent to the county in which the income is earned. David S. Iannucci, the governor's chief lobbyist, argued that it won't mean higher taxes for anyone, just a redistribution of taxes already collected.

Frederick W. Puddester, the governor's deputy budget secretary, said that while Mr. Goldstein's office doesn't have the information necessary to redistribute the tax, the administration can supply it using annual surveys of employers conducted by Department of Economic and Employment Development.

Mr. Iannucci also disputed the notion that Washington might impose its own "commuter tax" if Maryland approved the proposal.

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