Gov. Parris N. Glendening, who talked confidently about an income tax cut when he began his term, is now sounding much less certain that the state can afford one.
During a recent visit with bond-rating agencies in New York, the governor said he did not "anticipate an income tax reduction at either the 1997 or 1998 [legislative] session," according to top legislative analyst William S. Ratchford II, who attended the meetings.
"This was due to slow growth in revenues and his perception that this issue had lost momentum," Ratchford wrote in a May 6 memo to legislative leaders.
Yesterday, the governor said the memo had overstated his comments to the New York agencies, which rate the riskiness of Maryland bonds. He said he is taking a wait-and-see approach to a tax cut, and he outlined budget problems that could make such a reduction unwise.
"What I said to them is that we'll have to look at our funding very, very carefully and that we just have to make a decision as each [budget] goes through," the governor said. "We'll have to see how the economy goes."
However, he noted that forecasts show the state faces a deficit of $200 million in 1998 -- in a budget that totals $14.7 billion this year -- in addition to expected federal cuts in Medicaid, a medical assistance program for the poor.
Also, businesses are clamoring for the elimination of a sales tax on manufacturing equipment that brings about $55 million a year into state coffers, he said.
"It is part of our stated goal that when we can afford this, we ought to be dealing with the income tax situation," Glendening said. "Even some small cut is an important statement, but we have to look at it carefully."
Since taking office last year, the governor has faced cuts in federal aid, a sluggish economy and uncertain revenue forecasts. Glendening and legislative leaders agreed in March to postpone discussion of a tax cut for a year.
Champe C. McCulloch, president of the Maryland Chamber of Commerce, said his group strongly supports a decrease in the state's 5 percent personal income tax rate as a means of luring businesses to Maryland.
Told of Glendening's comments, he said, "There's no enthusiasm there for a reduction in the personal income tax, and he has said that a number of different ways."
McCulloch predicted that the public's interest in a tax cut would grow as the 1998 election nears. "The public's concern about taxes kind of waxes and wanes in direct proximity to the closeness of an election, because that's when they can do something about it," he said.
Kenneth Rodgers, a representative of Standard & Poor's, a bond-rating house that met with the governor April 29, said Glendening was more interested in tax cuts for businesses than in an income tax reduction.
State officials, including Glendening, have "more of a cautious attitude" toward an income tax cut than they had in previous discussions, Rodgers said.
Rodgers called such thinking "prudent," an assessment echoed by another bond-rating house, Fitch Investors Service, which yesterday continued the coveted AAA rating, the highest possible, for Maryland bonds to be sold next week.
House Speaker Casper R. Taylor Jr., who has urged a tax cut for two years, said the governor has been, at best, a reluctant ally on the issue.
"I think the question is, does he really want it?" the Allegany County Democrat said.
Pub Date: 5/31/96
