Chamber to seek 15% cut in state income tax rate Localities expected to oppose reducing 'piggyback' revenue

October 09, 1995|By John W. Frece | John W. Frece,SUN STAFF

OCEAN CITY -- Maryland's largest business organization will call today for a 15 percent cut in the state and local personal income tax rate as a way of making Maryland more competitive for jobs.

In welcoming remarks at the Maryland Chamber of Commerce's two-day legislative conference here, Chairman Wayne A. Mills is expected to urge the governor and General Assembly to adopt a 25 percent tax rate reduction as an eventual goal.

But as a first step, Mr. Mills, vice president and general manager for Washington Gas Light's Maryland division, said the 1996 General Assembly should approve a 15 percent cut that would begin in 1997 and be phased in over three years.

A reduction of that magnitude would be greater than the proposed cuts of 5 percent to 10 percent that Gov. Parris N. Glendening and legislative leaders have been discussing. But it is less than some more conservative members of the business community believe is necessary before Maryland can compete for jobs on an equal footing with Pennsylvania, Virginia, North Carolina and Delaware.

At a time when the state already is bracing for potentially huge cuts in federal aid, a cut in state taxes of any magnitude may prove practically difficult to achieve.

The chamber plan also calls for the state tax cut to be passed through to Baltimore and the state's 23 counties -- a potential cut to the [See Taxes, local "piggy-back" tax rate that is certain to make city and county leaders squeal in protest. The 24 major subdivisions in Maryland are permitted to add a "piggyback tax" on residents of up to 60 percent of their state income-tax obligation.

A 15 percent cut would translate into a $600 million loss of revenue to state government and a $300 million loss of revenue to Baltimore and the counties, said Robert R. Neall, the former Anne Arundel County executive who is now the chamber's top lobbyist.

"We're clearly opposed to any compromise of our piggyback rate. That's a local decision," said David S. Bliden, director of the Maryland Association of Counties, which represents local governments. "It also ignores fiscal realities," he said, referring to exploding school populations and flat property tax revenue that most counties face.

County officials already have secured a pledge from Mr. Glendening that any tax cut he pushes will not be passed through to local governments.

Mr. Mills, however, said a cut in the state rate is not enough. Corporate executives who decide whether their companies will move to or stay in a particular state look at the overall personal income tax rate, not just the state portion.

"When you roll in the piggyback, we have an effective rate of 8 percent, and we don't compete [with other states] very well," Mr. Mills said.

He defended the idea of going for 15 percent instead of 25 percent immediately, and of phasing it in over three years, saying: "Maryland didn't get where it is overnight." Aiming for a 25 percent cut in one year would not be reasonable, he said.

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