Governor calls for 10% tax cut Reduction in levy on personal income seen as boost for Md.

'Most important step'

He also proposes free college tuition plan, state police pay raise

November 20, 1996|By Thomas W. Waldron and David Folkenflik | Thomas W. Waldron and David Folkenflik,SUN STAFF Sun staff writer William F. Zorzi Jr. contributed to this article.

Gov. Parris N. Glendening called yesterday for a 10 percent cut in the state's personal income tax rate, a move aimed at boosting the sluggish Maryland economy and spreading some goodwill among voters.

On a Christmas-comes-early day in state government, Glendening also proposed an ambitious new scholarship program that would provide free college tuition for thousands of middle-class Marylanders.

And administration officials said the governor intends to give the state police a pay raise of about 10 percent in the budget he will submit to the General Assembly in January.

In perhaps the most significant policy announcement of his two-year tenure in the State House, Glendening said he had accepted the business community's argument that Maryland's relatively high 5 percent income tax rate is an obstacle to job growth.

"This [income] tax cut will help working families. It will put $485 million back into our taxpayers' pockets," Glendening said at a news conference at the World Trade Center in Baltimore. "It is the single most important step we can take to make Maryland more competitive and create more jobs."

At the same time, the governor said he will ask the General Assembly to double the state's 36-cents-a-pack tax on cigarettes -- giving Maryland one of the highest tobacco levies in the nation -- both to help pay for the tax cut and to discourage smoking.

Glendening's income tax cut would be phased in over three years, with the first reduction scheduled to take effect in January 1998 -- in time for voters to see their paychecks go up a bit before going to the polls in the fall.

But the bulk of the tax cut, and the hard budget decisions it would force the governor and legislators to make, would not come until after the 1998 elections.

For a Maryland family of four with an adjusted gross income of $50,000, the full 10 percent tax cut would translate into a savings of $167 in the year 2000, state officials said.

Business leaders, who have made an income tax cut their top priority the last year, praised Glendening's decision. "I believe the tax reduction is the right step and will give us the ammunition to go forward," said Arthur Ebersberger, an Anne Arundel County businessman who helped lead an economic development commission that proposed a tax cut earlier this year.

While legislators predicted that an income tax cut would have wide support in the General Assembly, some were critical that the governor had left many of the budget decisions for later.

"My first reaction is that his proposal is headed in the right direction," said House Speaker Casper R. Taylor Jr., an Allegany County Democrat who had earlier proposed his own 10 percent income tax cut. But, he added: "The budget cuts aren't identified."

Before his tax announcement, Glendening told a gathering of business and campus leaders at the University of Maryland Baltimore County that he will propose a new scholarship program that would ensure that middle-class Marylanders could afford to attend college.

Under the plan, inspired by a lottery-backed Georgia initiative, any state high school graduate with a B average enrolling at a public Maryland campus would have his or her first-year's tuition and required fees paid for by the state. Students who maintained a B average in college would continue to receive the scholarship. The plan, to begin in fall 1998, would not pay for room and board.

Marylanders with B averages attending private colleges in the state also would receive a subsidy, probably equivalent to the cost of attending a public campus, the governor said.

"The next generation of the work force should not have to begin their careers under a mountain of debt," Glendening told the group at UMBC. "What we must focus on are the middle-income families, the hard-working families for whom the prospect of paying for college is very, very daunting."

He said the cost of his tuition program -- pegged at $12 million during its first year -- would come from existing revenues, not new lotteries, fees or taxes. And, he said, the funds would not be deducted from other spending on higher education.

"It's a matter of just working on some tough budget decisions," Glendening said.

The scholarship plan's cost would climb to approximately $40 million a year as it was fully phased in, said Frederick W. Puddester, the state budget secretary.

Aides said the governor has not made a final decision on the size of his planned raise for state troopers, but Puddester said it would likely be about 10 percent for next year -- at a cost to the state of about $5 million a year -- with additional raises contemplated for future years.

Glendening's proposed 10 percent tax cut would be phased in over three years -- 2 percent coming in 1998, 3 percent in 1999 and the remaining 5 percent in the year 2000. The plan would cut the state's top tax rate of 5 percent -- paid by most Marylanders -- to 4.5 percent.

Local "piggyback" income taxes would not be affected by the state tax cut, Glendening said.

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