Waiting on Washington Md. tax cut: Governor is right to delay till March before deciding.

January 14, 1996

GIVEN MARYLAND'S precarious economy and the continuing deadlock in Washington over the size of budget cuts affecting the states, it's hard to make a solid case for a major income-tax cut in Annapolis. Gov. Parris Glendening is going to have enough troubles presenting a balanced budget on Wednesday without having to cope with the loss of a quarter-billion dollars needed to lower state income tax rates.

Thus, it was not surprising that Mr. Glendening said he would wait until March before deciding if the state can afford a tax cut this year. The outlook is not promising.

Already, revenue estimates are expected to fall short by $250 million over the next 18 months. A bleak Christmas sales season and the devastation of the January snowfalls to the state economy are ominous signs of worse news to come. The two federal shutdowns also will cost the state tens of millions in lost tax revenue. And the governor still doesn't know how much Maryland will lose in federal aid -- or where the cuts will come.

Given these variables, how can the governor responsibly call for a big tax reduction when he submits his budget on Wednesday? Maybe by March, after new state revenue estimates are released, he'll have a better fixed on the strength of the local economy. And maybe by then, Newt Gingrich, Bob Dole and Bill Clinton will have devised a way to bridge their differences on a balanced-budget plan.

Knowing the extent of the federal cutbacks is critical. Is the heating program for impoverished seniors going to be eliminated? If so, the governor must decide if Maryland will pick up the $15 million tab for the 11,000 affected seniors. Until Washington completes work on a spending plan for this year, the states are in a terrible bind.

The governor's budget on Wednesday won't please a lot of people. There will be cuts in agencies, consolidations, the elimination of up to 1,000 jobs and a general holddown on spending. Even that may not be enough, depending on events in Washington.

Those who insist on a big state income-tax cut on top of all this have an obligation to detail precisely how they would pay for it. It's easy to call for lower taxes without taking on the responsibility of showing how it would be done. That's not an option for the governor, or for the General Assembly. They must base their actions on the cold, hard fiscal facts. Waiting until March at least gives state leaders a few more months before a final decision is made on lowering taxes in such uncertain times.

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