Tax cuts: a road of many twists Analysis : Gov. Parris N. Glendening says he had no choice but to change his mind about cutting income taxes, but Republicans accuse him of backtracking.

January 11, 1996|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

In speech after speech last summer, Gov. Parris N. Glendening spoke of the need for Maryland to cut income taxes to make itself more attractive to business.

Now, however, the governor has decided not to propose a tax cut in the budget he will present to the legislature next week. The state won't know if it can afford one before March, he says.

Republican lawmakers and some business leaders are accusing the governor of backtracking. Mr. Glendening says he had no choice.

"To make a decision now would be not just premature, but irresponsible," he said yesterday during a meeting with editors at The Sun. "We'll have to take this issue up again in March."

From Mr. Glendening's perspective, what has changed since summer is not his position, but financial realities.

As Congress and President Clinton battle over the shape of a final federal budget, decisions with huge financial implications for the Maryland budget have not been made, he noted. There is still no agreement, for example, on the rules and budget for hTC Medicaid and welfare -- two of the biggest items in the state budget.

"Could anyone have projected that Congress and the president would be at such impasse that they still haven't passed a budget?" Mr. Glendening said. "No one last year would have predicted the breakdown of the federal government, and that's what has changed."

Beyond the questions about Maryland's share of federal funds, the showdown in Washington has created significant problems for the state's economy, he said, as federal workers have become reluctant to spend in uncertain times. In addition, many other Maryland residents are losing jobs tied to the federal government.

The result, Mr. Glendening said, has been a significant reduction in the state's revenues from sales and income taxes. The next round of revenue projections, due in March, will show an even more dramatic decline, he predicted.

"For the life of me, I don't understand how anyone can say, 'We'll cut taxes this much' at this time," he said.

Over the past year and a half, the governor has followed a circuitous path on the tax cut issue.

During the 1994 campaign, Mr. Glendening simply promised not to raise taxes, and he argued vigorously against Republican challenger Ellen R. Sauerbrey's proposal to cut state income taxes by 24 percent. Such a cut, he said then, would devastate state and local government budgets.

In March, however, faced with a more conservative legislature and a perceived anti-tax sentiment among business leaders and voters, Mr. Glendening embraced a reduction, as did the General Assembly's two presiding officers.

House Speaker Casper R. Taylor Jr. was among those who had urged Mr. Glendening to support tax reductions this year. But this week, even Mr. Taylor -- while stressing his commitment to cut taxes eventually -- said the state cannot make such a decision before March.

Yesterday, Senate President Thomas V. Mike Miller Jr. agreed, saying the state has little choice but to postpone a tax cut, at least until the federal crisis is resolved.

"Taxes are not a tough issue at all," said Mr. Miller, responding to a reporter's question. "It's a no-brainer. If you don't have the money in the coffers, you don't provide tax relief. I'm willing to put it off, if necessary."

Although Mr. Glendening will not propose an income tax cut, at least for now, others will.

Republican lawmakers are pushing a proposal to cut income taxes by 6 percent, which would cost the state budget about $215 million a year. To keep the state budget in balance, as required by the Maryland Constitution, lawmakers would have to cut spending by that amount.

Del. Robert H. Kittleman of Howard County, the House Republican leader and a tax-cut proponent, said that if Mr. Glendening really wanted a tax cut, he would make it a priority.

"If you're not committed to it now," he said, "you probably won't do it, because everything else will take priority."

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