Maryland lawmakers rule out tax cut Revenue projections down after blizzard, federal shutdown

March 12, 1996|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

Key lawmakers yesterday ruled out a cut in state income taxes this legislative term after the release of gloomy revenue estimates that were dragged down by the federal budget stalemate and the region's harsh winter weather.

The Board of Revenue Estimates yesterday dropped its projection of state revenue by $55 million for the current fiscal year and $77 million for the budget year beginning in July -- reductions that make a tax cut impractical, legislators said.

"I think they [the projections] literally kill a tax cut this year," said Del. Howard P. Rawlings, a Baltimore Democrat who chairs the House Appropriations Committee.

Legislative leaders and Gov. Parris N. Glendening had pledged to push for a tax cut in the current 90-day session. But the state's sluggish economy and problems with the federal budget forced them to wait for the new revenue numbers to see if the state could afford the loss of revenue.

"This is very bleak," said Senate President Thomas V. Mike Miller Jr. "Now, more than ever," he said, the state should wait for a resolution of the federal budget standoff -- particularly on expensive items such as Medicaid and welfare -- before talking about tax reductions.

Mr. Glendening declined yesterday to discuss the figures but was expected to say at a news conference today that he was abandoning discussion of a tax cut for the year.

House Speaker Casper R. Taylor Jr., a key supporter of a tax cut, also declined to comment.

A lobbyist for the Maryland Chamber of Commerce, which had made a tax cut its top priority, said the revenue figures make discussion this year of such a reduction "academic."

But the chamber lobbyist, Robert R. Neall, said tax cuts and regulatory reform will be needed in the long term to turn around the state's economic outlook.

"The numbers point out the fact that major components of our economy are broken," said Mr. Neall, a former Anne Arundel County executive as well as a fiscal expert during his tenure in the House of Delegates.

The revenue board blamed the slower-than-expected growth in state income and sales taxes partially on the severe snowstorms that kept people out of stores and restaurants.

Uncertainty surrounding Congress' failure to enact a federal budget also fueled Maryland's economic slowdown, as did the rise in interest rates, it said.

"Clearly, the blizzard and federal furloughs lowered wages in both the private and government sectors," the revenue board said in a prepared statement. "While some purchases and wages will be made up, impulse buying, restaurant meals and federal contractor payments with their resulting wages and taxes may be gone for good."

The Board of Revenue Estimates is composed of state Comptroller Louis L. Goldstein, state Treasurer Richard N. Dixon and state Budget Secretary Marita B. Brown.

The board projected that winter weather coupled with the new 65-mph speed limit are driving down the number of traffic tickets issued in the state, resulting in the loss of some $8.5 million this year and next.

Some of the state's income sources were doing better than expected.

The board estimated that lottery proceeds for the two years will be about $7.5 million higher than projected in December. And estate taxes will be about $7 million higher than expected this year, the result of a surge in deaths of wealthier Marylanders.

The revised revenue estimates mean the governor and General Assembly will have to slice into spending plans for the current fiscal year and for the one beginning July 1.

"It's bad. It's worse than we thought it was going to be," said Sen. Barbara A. Hoffman, chairwoman of the Budget and Taxation Committee.

She said she would like to balance the budget in the current year by dipping into a reserve fund set aside for fiscal emergencies.

The legislature could tap into the state transportation fund to cover some of next year's revenue problems, said Ms. Hoffman, a Baltimore Democrat.

But, she said, the legislature will have to make more spending cuts than anticipated. The state budget for next year is due to be enacted by the end of the month.

Pub Date: 3/12/96

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