With Senate tax plan on table, House smashes it Rhetoric heats up over raising taxes

March 06, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- The squirming on taxes in the General Assembly began in earnest yesterday.

The Senate leadership, worried it lacks the votes to pass a mammoth tax increase, spent hours discussing the politically explosive components of the proposed package but delayed voting, possibly until next week.

"I think we'll get it, but I think it's close," said Sen. Laurence Levitan, D-Montgomery, Budget and Taxation Committee chairman.

Across the hall, House leaders trashed the Senate proposal before it even came to a vote, saying it does too little cutting of spending and too much raising of taxes.

"The [Senate] package has no cost containment in it whatsoever that I see," complained House Speaker R. Clayton Mitchell Jr., D-Kent.

Meanwhile, a 25-member rump group of House and Senate conservatives -- led by Republicans, but including at least eight Democrats -- pressed for a budget with no new taxes, saying that the state, like a family, must tighten its belt and live within its means.

One Republican delegate, John G. Gary of Anne Arundel, boldly declared that the bipartisan rump coalition has more than the 71-vote majority needed to stop a tax increase from passing the House of Delegates.

"We're not about hacking apart the fabric of government," said House Minority Leader Ellen R. Sauerbrey, R-Baltimore County. "We're for holding the line."

What Mrs. Sauerbrey and the other conservatives want to hold the line against is a Senate tax package that, when all the components are added together, would raise the state taxes Marylanders pay by at least $636 million over the 14-month period that begins May 1. It would do that by:

* Increasing the state's 5 percent sales tax to 5.5 percent from May 1 through June 30, 1994. Both Gov. William Donald Schaefer and Speaker Mitchell say they are against raising the sales tax rate, preferring instead to expand the sales tax base.

The Senate plan would do that, but not to the extent some House members would like. The senators would repeal current sales tax exemptions on potato chips, pretzels, popped popcorn, nuts and other snack foods; on salads, soups, sandwiches and other prepared foods sold in grocery stores; on food sold in college and hospital cafeterias; and on newspapers sold over the counter.

In addition, the sales tax would be expanded to include a long list of services, including repairs of everything from computers, stereos, refrigerators and clocks to jewelry, furniture, tools, bicycles and guns.

Also to be taxed under the Senate plan: cellular phone and beeper services; custom-calling features such as call waiting or call forwarding (but not basic phone service); 900 and 976 for-profit phone numbers; telephone answering services; dry cleaning; tanning, massage, dating and escort services; saunas, steam baths and diet workshops; storage of household goods and furs, mini-storage facilities; professional lawn care and landscaping; credit reporting; security services; and pay-per-view TV.

Conservative Sen. Charles H. Smelser, D-Carroll, was so stunned by the breadth of the tax proposal, he asked sarcastically if there was a way to get the last few coins: "Does this have something that turns the taxpayers upside down and shakes them?"

That was just the sales tax component.

* The Senate also wants to raise "sin taxes": It would boost the tax on cigarettes from 16 to 26 cents a pack; on liquor from $1.50 to $2.25 a gallon; on wine from 40 cents to 60 cents a gallon; and on beer from 9 cents to 13.5 cents a gallon. Again, some lawmakers want to go further, following Governor Schaefer's lead and raising the tax on cigarettes by 25 cents a pack.

* At the request of state Comptroller Louis L. Goldstein, the Senate also is proposing a variety of tax enforcement and compliance measures, including taxing the income of part-year residents of the state; taxing horse race winnings; raising the interest owed on overdue taxes from 2 percent to 3 percent over pTC the prime rate; and increasing the charge taxpayers must pay for sticking the state with bad checks from $10 to $30 per check.

* Finally, there's the gas tax.

The Senate proposal calls for raising the state's 18.5-cent-a-gallon gas tax by 6 cents a gallon. Truckers would also pay a 3/4-of-a-cent surcharge on diesel.

The tax on aviation fuel also would go up.

Part of the money -- an amount equivalent to about a penny of the overall increase -- would go to cover the entire operating deficits Montgomery and Prince George's counties currently share with the state for Washington-area subway and bus service.

The state already pays all such transit subsidies for Baltimore.

Finally, because local governments are likely to lose as much as $230 million in state aid, Baltimore and the 23 counties would be given authority to raise their local piggyback income tax rates from the current maximum 50 percent to 60 percent.

When the proposed tax on dry cleaning came up, Sen. Julian L. Lapides, D-Baltimore, gave his assessment of the day: "I think we're taking the whole state to the cleaners with this."

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