Taylor urges Assembly to consider tax reduction

January 05, 1995|By John W. Frece | John W. Frece,Sun Staff Writer

House Speaker Casper R. Taylor Jr., eager to prove that Maryland Democrats heard the message of voters in November, said yesterday that the General Assembly should consider cutting taxes this year.

The Allegany County Democrat said that he was not pushing any particular proposal but that he was convinced that most Marylanders believe their tax burden is too high and thinks the legislature should respond to that complaint.

He said the plan of legislative leaders and Gov.-elect Parris N. Glendening to limit the increase in state spending next year to 4.5 percent, combined with an improving economy, could create a surplus of $250 million or more.

At least $110 million of that, he said, could be used to give taxpayers an across-the-board 3 percent income tax cut, perhaps by readjusting the lowest tax brackets or by increasing the personal exemption.

The idea is strikingly similar to -- though much more modest than -- the 24 percent tax cut proposal (6 percent per year) that nearly propelled Republican Ellen R. Sauerbrey into the Governor's Mansion.

Mrs. Sauerbrey's successor as minority leader, Howard County Del. Robert H. Kittleman, has already said that House Republicans intend to introduce a Sauerbrey-type tax cut bill, and Mr. Taylor seems intent on beating them to the punch.

But the notion of possibly granting tax relief this year puts Mr. Taylor at odds with Mr. Glendening, who has said he wants to get state spending under control and then propose a significant tax cut in the third or fourth year of his term -- shortly before he and the legislature stand for re-election.

Mr. Glendening yesterday counseled caution.

He said the state does not know what large costs the new Republican-controlled Congress might shift to the states, nor whether Maryland's economy will continue to expand, nor whether the General Assembly will approve the major budget adjustments he will propose as a means of eliminating projected deficits.

"If we are to cut the taxes without knowing where we are on all three of those matters, we could be in for something of a disaster by cutting taxes that could necessitate a tax increase three years from now," he said.

Mr. Taylor also said he wants the General Assembly to begin a serious discussion about overhauling the entire state tax structure. As a starting point, he said lawmakers should consider:

* Reducing the top tax bracket for the state's wealthiest citizens -- "those with six- or seven-digit salaries" -- from 5 to 4.5 percent. He said the change might lure to Maryland more corporate "decision-makers who decide where new jobs are going to be created." The cost would be $300 million in lost revenue.

* To make up for that, Mr. Taylor said lawmakers should consider broadening the state sales tax base to include an array of unspecified services that now are untaxed. Such a change -- initially proposed several years ago by the Linowes commission, the tax panel set up Gov. William Donald Schaefer -- would reflect the shift in the state's economy from products and manufacturing to service jobs.

If the sales tax base is broadened, Mr. Taylor said it might be possible to cut the overall sales tax rate from 5 percent to 4.5 percent and still generate enough new tax revenue to allow a cut in personal income taxes.

Mr. Taylor stressed that he was not promising to push for enactment of any of those proposals, but merely to launch the discussion. "It could very well be too ambitious for one session. It could very well be a two-session project," he said. "Or, it could be rejected after it is totally explored."

"But I would rather be in a position of intelligently rejecting it after thorough examination rather than rejecting it out of hand," he said.

Both Mr. Glendening and Senate President Thomas V. Mike Miller Jr., however, expressed concern.

"I'm personally not certain that is a wise move, in that it could make the tax system more regressive," said Mr. Miller, a Prince George's County Democrat. He said he feared the legislature would pass the income tax cut, but then reject the provision to broaden the sales tax base, leaving the state facing a net loss of revenue.

Mr. Glendening said that while Mr. Taylor's proposal might be "revenue neutral" to the state, it would not seem revenue neutral to those who purchase services that are currently untaxed but which would be taxed under such a plan.

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