October 20, 1996
SUDDENLY, THE RUSH is on to embrace an income-tax cut for Marylanders. The state's business-development chief is leading the charge, along with the House speaker. The governor now says he wants to take a closer look at the options, and Baltimore's mayor says he is cautiously supportive.
While these leaders aren't yet on the identical page, this time they seem to be reading from the same book.
Momentum is building. The state's business community has turned the income-tax cut into an incessant mantra. James Brady, Maryland's business development secretary, calls a tax cut his No. 1 priority, though that's at odds with his more cautious boss, Gov. Parris Glendening. And Mayor Kurt Schmoke has weighed in on the side of an income-tax cut -- but only if the lost revenues could be made up somehow.
Still, the key player is the governor. He remains uneasy about those who are quick to support tax cuts but unwilling to find ways to offset the lost revenue -- $200 million to $300 million a year. You can't cut existing state agencies that much without major consequences. There's no groundswell behind an expansion of the sales tax or a hike in "sin" taxes as an offset.
Serious discussions are under way in the State House. The task remains daunting. Maryland already faces a structural deficit of $100 million to $200 million caused largely by mandated increases in local aid each year that exceed the new revenue coming in. Erasing this deficit has proved difficult because much of the new local aid flows into schools and colleges.
Compounding the problem is a balanced budget for the current year that is in jeopardy due to a troubling downturn in lottery receipts and a possible delay in implementing money-saving Medicaid reforms. Meanwhile, the state's economy remains very fragile.
The governor is right to take a cynical view toward leaders who claim that an income-tax cut is certain to generate oodles of new tax dollars that will more than erase any revenue loss. There's no proof that would happen. You can't responsibly run a $14 billion government on the basis of wishful thinking.
But if all the parties can agree on the shape and size of a tax cut and can find realistic, concrete ways to offset lost revenue over the long term, we may yet see a reduction in Maryland's 5 percent income-tax rate. Blue-sky proposals, though, aren't acceptable. Marylanders expect their leaders to use prudence and caution in revising the state's tax policy.
Pub Date: 10/20/96
