Schmoke to seek income tax boost Citing revenue crisis, he'll ask 10% rise in city's piggyback levy

Budget unveiling set today

Library, recreation, museum cutbacks at stake, mayor warns

April 17, 1996|By Eric Siegel | Eric Siegel,SUN STAFF

Warning of severe cuts in library, museum and recreation services unless more revenue is raised, Baltimore Mayor Kurt L. Schmoke is proposing a 10 percent increase in the city's income tax.

Under the mayor's proposal, the piggyback income tax -- calculated as a percentage of the state income tax -- would increase from 50 percent to 55 percent.

Mayor Schmoke's proposed tax increase would take effect Jan. 1 and would raise $4.9 million in its first six months. It is part of his budget for the fiscal year that begins July 1 and is to be released today.

For a married couple earning $25,000 with two dependents and taking standard deductions, the increase would be $30 a year -- to $326 instead of the current $296. A couple earning $62,500 would pay $131 more -- $1,444 compared to $1,313.

Mr. Schmoke said through a spokesman that the increase would also help relieve pressure on the Fire Department to temporarily disband units to avoid paying overtime.

"We had to come up with a new revenue source this year," Mr. Schmoke said through the spokesman. "The overwhelming majority of our taxpayers will pay less than $75 a year more by this proposal."

The tax increase would be the first change in the city's personal income tax rate since the piggyback tax was instituted in 1967.

It needs the approval of a majority of the 19-member City Council. At least six council members said yesterday that they would oppose the tax increase, but several others said they were keeping an open mind.

Overall, the net effect of the proposed increase in its first full year would be to virtually offset savings realized from three nickel cuts in the property tax rate enacted in the past few years.

If approved by the council, Baltimore would be the 12th jurisdiction in Maryland to raise its local income tax above 50 percent since 1992, when the General Assembly allowed the piggyback rate to be set as high as 60 percent.

Those jurisdictions include Montgomery and Prince George's counties at 60 percent; Carroll County at 58 percent; and Baltimore County at 55 percent.

Among other Baltimore metropolitan area jurisdictions, Anne Arundel, Harford and Howard counties are at 50 percent.

Even with the money from the proposed income tax increase, the general fund -- Baltimore's principal source of operating revenues -- will decline by $600,000, largely because of reduced receipts from property taxes and the phasing out of the bottle tax.

And there will still be large cuts in the Department of Recreation and Parks, resulting in reduced park maintenance and a restructuring of services.

Property tax rate

The 1997 budget does not affect the city's property tax rate, which at $5.85 per $100 of assessed value is the highest by far in the state.

The property tax rate has been cut three times for a total of 15 cents during Mr. Schmoke's 8 1/2 -year tenure in office.

In his successful campaign for a third term last year, the mayor promised to trim another 5 cents off the property tax rate in each of the next four years. But he said in January that because of

poor revenue projections he would not be able to keep his pledge.

Yesterday, budget officials said that the mayor chose to raise the piggyback tax and not the property tax because incomes are more likely to increase over time than property values, and because he did not want to undo progress that had been made in reducing the property tax rate.

The property tax reductions saved city taxpayers a total of about $12 million a year; the piggyback income tax would raise about $10 million a year.

Today's proposal marks the third time in the past three years that Mr. Schmoke has proposed increasing the city's income tax.

Stiff opposition

In December 1992 and in March 1993, the mayor proposed increasing the piggyback tax to 55 percent and 52 percent, respectively. But the proposals were never enacted because of stiff opposition from the council.

In both those instances, money from the proposed increases was to be earmarked for improved public safety -- police and fire in the first case, police in the second.

But regardless of the fate of the latest piggyback proposal, fiscal 1997's $2 billion operating budget maintains police and fire services at essentially the same level they are now, after taking into account one-time reductions to the pension fund.

The $4.9 million generated by the piggyback tax increase would go to seven agencies: the Circuit Court, the Health Department, the Enoch Pratt Free Library, the Baltimore Museum of Art, the Recreation and Parks Department, the Sheriff's Office and the state's attorney's office.

Without the increase, those agencies would have to absorb cuts in city funds ranging from $40,000, or 0.2 percent, for the Health Department, to $5.4 million, or 17.1 percent, for the recreation department. Library funding would be reduced $1.3 million, or 8.4 percent, while the BMA would be cut by $471,000, or 15.8 percent.

124 jobs would be cut

Even with the increase, the recreation department's funding would decline by $3.8 million, or 12 percent, resulting in the elimination of 124 positions.

They include the 25-person horticulture division, which operates the greenhouse at Cylburn Arboretum and the Conservatory at Druid Hill Park, both of which would close.

Library funding would increase by $200,000, or 1.3 percent, excluding a one-time grant this year of $1.2 million for computers and multimedia reference materials. Still, nine library jobs would be cut.

Citywide, 216 positions are to be abolished. Budget officials said it is unclear how many of those, if any, might come from layoffs, because they do not know how many workers will sign up for an early retirement plan.

Spending on construction projects is to increase next year by $23 million, to $256 million. Virtually all of the increase comes from additional money from reduced payments on refinanced debts.

Pub Date: 4/17/96

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