Md. income tax revenue up 5.8%

August 27, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Maryland's state government raked in 5.8 percent more money in personal and corporate income taxes during the fiscal year that ended June 30, Comptroller Louis L. Goldstein reported yesterday.

He said the increase over fiscal 1993 -- driven by a 31.4 percent jump in corporate income taxes -- is proof that Maryland is shaking off the after-effects of the recession. The total was slightly higher than state projections.

But the announcement met with skepticism from economists, who said the rebound in corporate tax receipts was so sharp only because the recession was so deep here. Also, the gain in personal income tax receipts was smaller than in the nearby states of Virginia and North Carolina.

The report also contained bad news for Baltimore. The comptroller's office said it is the only one of the state's 24 jurisdictions that saw revenue from the local income tax, or piggyback tax, fall in fiscal 1994 from the previous year. The city's income tax collection fell 0.9 percent to $124.6 million.

"Maryland is back," said Mr. Goldstein. "I think it has been because of job growth, mainly in business services. A lot of defense industries have suffered."

Two leading economists, one of whom has been bullish on Maryland's outlook and the other of whom has been gloomy, each viewed the news differently.

"None of that's a surprise," said Michael A. Conte, director of the University of Baltimore's Regional Economic Studies Program, and the optimist in the group. "The corporate income tax went up so much [because] by its nature it's a much more volatile revenue source than any of the other broad-based taxes. None )) of the other broad-based taxes can ever be below zero. However, you can have negative profit and you can have zero profits."

Charles McMillion, president of MBG Information Services in Washington, said the state has been adding jobs very slowly during the economic recovery. More new jobs are the main ingredient of higher tax collections, especially when income tax rates stay the same as they have in Maryland.

Maryland has only 2,000 more jobs statewide than it did in 1988, he said, and is still below its 1990 employment peak. About 2.1 million Marylanders had jobs at the end of June.

"Net, it's been six years with no job growth," Mr. McMillion said.

Comptroller's office spokesman Marvin Bond said Maryland's personal income tax raised $3.2 billion from individuals, up 4.7 percent, and $264 million from corporate taxpayers in fiscal 1994. The state's current budget is about $13.3 billion.

Maryland's corporate income tax payments grew faster than in neighboring states, but payments by individuals grew more slowly than North Carolina or Virginia. The corporate tax jump followed a 34 percent drop between 1989 and 1992, and left corporate tax payments still below 1989 levels.

Virginia's individual tax collections rose 6.3 percent, despite no increase in tax rates, said John Layman, an economist for Virginia's Department of Taxation. Corporate tax payments rose 10.1 percent, after adjusting for tax windfalls in fiscal 1993. North Carolina's individual tax collections rose 6.6 percent and corporate tax revenues climbed 13.5 percent, Department of Revenue spokeswoman Jean Kossoff said. North Carolina also did not raise taxes. "That's what the economy did," Ms. Kossoff said.

Local income taxes for counties statewide, plus Baltimore, jumped 8.8 percent to $1.7 billion. Unlike the state, many jurisdictions have raised their income tax rates this year or last.

"This says Baltimore City is in desperate, desperate shape," said Mr. McMillion, who added that the city has lost 3,000 jobs in the last year even as the national economy gained steam. "It lost all the ground it gained in the renaissance in 1991 and then each year it has set new [employment] lows."

Susan Eliasberg, a spokeswoman for Baltimore Development Corp., said that the city's collections were still higher than in all but one of the last six years.

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