'Steady, but unspectacular' growth Md. outlook: Revenue estimates may force spending cuts to pay for income-tax reduction.

December 22, 1996

MARYLAND'S Board of Revenue Estimates has sent a mixed message to Gov. Parris N. Glendening. The state's economy is slowly strengthening, the board concluded last week, but don't expect the pace to quicken. Look for "steady, but unspectacular" increases in jobs and in tax revenue from now through the year 2001.

This state is inching ahead on the economic front at less than half the rate of high-growth years. New jobs are being added at about 1.4 percent a year -- a pittance compared with a decade ago. Tax revenues over the next two years will rise only about 3.3 percent. That's a big improvement after Maryland's slow climb out of recession in the early 1990s, but the state continues to lag behind the pace of economic growth nationwide.

For Mr. Glendening, the report doesn't offer much help in achieving his twin undertakings of creating costly new social programs while simultaneously reducing the state's income-tax rate. Last week's revenue estimates are likely to add to the cynicism and concern over the governor's seemingly contradictory objectives.

Lowering the state's income-tax rate has become a mantra for Maryland's business leaders. They are convinced it holds the key to economic development. The governor agrees. So does House Speaker Casper R. Taylor. Both men list this tax reduction as their No. 1 goal for the General Assembly session. But Senate President Mike Miller is skeptically awaiting the details of a tax bill coming from the House.

Maryland's economy isn't generating enough new tax revenue to make a tax cut easy to accomplish. Compounding the problem is the governor's long list of expensive initiatives.

The only responsible way to fashion an income-tax cut is to lower state spending in the coming years. This probably means jettisoning initiatives that create new entitlements or rise dramatically in cost over the long term. It also means deeper cuts in current programs than legislators typically make.

A lower income-tax rate would cheer corporate leaders and relocation specialists across the country. It would prove an immediate boon to small-business owners here. The trick for the governor and lawmakers is to fit a tax reduction into a fiscal situation where revenues aren't growing very fast and expenses for education, public safety and health keep rising rapidly. Frugal budgeting is imperative.

Pub Date: 12/22/96

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