House leaders create an 'ouchless' tax plan Package doesn't include some of the Senate plan's unpopular levies.

March 20, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- House leaders have concocted a $247 million tax package designed to keep most ordinary Maryland taxpayers from screaming "ouch."

The plan would hit Maryland's wealthiest taxpayers with a higher income tax bracket. But, as presented for the first time to Ways and Means Committee members last night, the plan would not contain some of the Senate's more controversial proposals, such as higher taxes on cigarettes, alcoholic beverages and dry cleaning.

Anne Arundel Democrat Tyras S. Athey, the Ways and Means chairman, said the committee could vote on the plan as early as today, but he said he expected unspecified changes to the plan that could delay a vote until later.

"What we're trying to do is raise funds and enhance revenues without having a direct hit on any particular area or person," he explained.

Even though the draft House plan would raise approximately the same amount of money as the $245 million plan the Senate has approved, delegates hoped it would be as invisible as possible to average taxpayers.

In place of some of the Senate's proposed tax increases, the House plan substitutes a new 6 percent tax bracket for Marylanders with taxable incomes of $100,000 or more.

It also calls for raising the state's 7 percent corporate income tax rate to 7.5 percent for corporations that earn $1 million or less a year, and to 8 percent for those that earn more than $1 million. Corporations with no taxable income would have to pay a $100 minimum tax.

The new tax bracket for individuals would raise nearly $93 million for the state plus an additional $46 million for local governments. The higher corporate taxes would raise nearly $30 million more for the state.

Otherwise, the House plan calls for repeal of most of the same sales tax exemptions called for in the Senate plan, plus a couple more. Among the items that the repeal would subject to taxation: snack foods, such as pretzels or potato chips; ready-to-eat food, such as salads or sandwiches, sold in grocery stores; newspapers sold out of the box, over the counter or for home delivery; and installation services, such as the labor cost of installing an air conditioner or other appliance.

As would the Senate plan, the House plan would extend the 5 percent sales tax to car phones, beeper and telephone answering services, to credit reporting,and to residential and commercial security services. In addition, the House plan would apply the sales tax to janitorial and other building services, to exterminating, and to stenography.

Both plans call for a variety of tax enforcement and compliance actions that would raise $18 million (House) to $21 million (Senate). The changes would include increasing bad check charges from $10 to $30, requiring tax clearances before someone may receive professional or occupational licenses or before they could bid on or be awarded state contracts, and increasing the interest rate on overdue taxes.

The two chambers are considering tax plans to fill the gap between proposed state spending and a predicted revenue shortfall in fiscal 1993.

To keep the size of the tax package as small as possible, the House Appropriations Committee continued to trim the budget yesterday, reducing the gap to an estimated $170 million.

The tax package under discussion would raise more money than that to allow funds to be set aside in a "Rainy Day Fund" in case revenue projections are once again too optimistic and the budget again slips out of balance.

Some of the extra money could be used to send financial aid to Baltimore and the state's poorest counties; to restore state funds for educational placements of disabled students; and for other specific programs that lawmakers might decide to finance to solidify political support.

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