Budget passes but tax boosts will jolt many Prices going up for gas, pretzels and cigarettes

April 11, 1992|By John W. Frece and Marina Sarris | John W. Frece and Marina Sarris,Annapolis Bureau Laura Lippman of the Annapolis Bureau contributed to this ** article.

ANNAPOLIS -- The General Assembly finally passed a budget yesterday, rammed through a nearly half-billion dollar tax package and bid good riddance to the divisive 1992 legislative session.

The taxes will mean Marylanders will pay a nickel more a gallon at the pump for gasoline, 20 cents more a pack for cigarettes, and $8 more for annual car registrations.

They also will pay higher taxes on pretzels, chips and other snack foods, for car phones, newspapers, personal pagers, salads or sandwiches in grocery stores, pay-per-view TV and other goods and services that until now have escaped the tax collector's reach.

Marylanders with taxable incomes of $100,000 or more, or couples with combined taxable incomes of $150,000 or more, would be subjected to a new 6 percent income tax bracket for the 1992-1994 tax years. The new bracket is scheduled to end automatically on Dec. 31, 1994.

Gov. William Donald Schaefer wasted no time, signing the bills into law at 11 p.m., just minutes after the General Assembly finally adjourned its 94-day session.

Looking into a bank of TV cameras, the governor told Marylanders: "You owe these men down here a real debt of gratitude for real courage." He said the state would have lost its valued triple-A bond rating and a "doomsday" list of drastic program cuts would have gone into effect had the legislature failed.

But opponents called it the largest tax increase in Maryland history -- and one that could have been avoided had lawmakers tried harder to reduce the size of government.

"I'm absolutely convinced that what the legislature is doing is the absolute opposite of what taxpayers want," said House Republican leader Ellen R. Sauerbrey of Baltimore County.

Together, the higher taxes raise enough money to close a $250 million deficit in the operating budget and stash another $50 million away for the next rainy day (which some lawmakers predict could come as early as this summer).

They also put $122 million in the state's Transportation Trust Fund to leverage federal highway funds and pay for new roads.

The legislature granted authority to Baltimore and the 23 counties to raise their maximum piggyback income tax rates from 50 to 60 percent, a potential $288 million in taxing power designed to help localities make up for a permanent $249 million reduction in state aid.

Delegate Sauerbrey said the state was avoiding its responsibilities. "We have reduced our budget, not our government, by shifting the burden to the locals," she said.

The first of the three tax bills,which would raise the cigarette tax, repeal sales tax exemptions and expand the sales tax base, barely survived a 25-22 Senate vote last night. It was later approved in the House, 80-52.

Minutes later, the Senate voted 26-21 to create the new 6 percent tax bracket and send additional aid to Baltimore and five poor rural counties. The bill also will expand the piggyback tax authority of local governments, although even proponents conceded that is likely to widen the gap between rich and poor subdivisions. The House approved the measure, 79-57.

Finally, the Senate approved the gas tax increase, 28-19, and the House followed suit, 81-55.

Sen. F. Vernon Boozer, a Towson Republican, complained bitterly that Maryland is already widely considered a high-tax state and predicted, "After tonight or tomorrow, we're probably going to be number one."

Defenders of the tax plan, however, said while they were not happy about voting for higher taxes either, neither could they push for deeper cuts in basic government services.

"This budget shirks our responsibilities," said Sen. Barbara A. Hoffman, D-Baltimore. "I'm voting for it because the alternative is worse."

Earlier in the long final day, the Senate voted, 30-17, and the House, 80-51, to pass the $12.1 billion operating budget for the fiscal year that begins July 1.

To get it to that level, the legislature reduced spending proposed in Schaefer's original budget by $487.5 million. That figure included unprecedented cuts in aid to local governments and modest reductions in the state's huge Medicaid and welfare budgets. Another $190 million was trimmed from the bureaucracy.

But it still left the state facing a deficit of about $175 million, on top of which about $75 million in local aid programs -- including $30 million for Baltimore and five poor rural counties -- was added.

The state work force under the new budget was reduced to 72,850, about 4,000 below the peak reached in fiscal 1991 and almost down to the level budgeted in fiscal 1989.

Those cuts came on top of about $1 billion in reductions in state spending over the past 18 months.

The General Assembly also approved a $350 million capital construction budget last night that included money for prisons, hospitals, parks and schools.

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