7 percent cut in income tax gathers support Md. lawmakers loath to raise other taxes

March 05, 1997|By Thomas W. Waldron and C. Fraser Smith | Thomas W. Waldron and C. Fraser Smith,SUN STAFF

House of Delegates leaders abandoned their proposed 10 percent cut in Maryland's income tax yesterday, settling on a less ambitious 7 percent reduction to be paid for entirely through budget cuts instead of other tax increases.

The move is designed to win support from moderate-to-conservative Democrats who fear that any tax increase -- even if more than balanced out by the income tax cut -- would hurt their re-election chances in 1998.

The new plan seemed likely to attract a considerable number of Republican votes.

"We're trying to find the biggest tax cut that is responsible, given the resources we have," said House Speaker Casper R. Taylor Jr., in explaining the decision to scrap his plan for higher telecommunications taxes to help offset revenue lost to an income tax cut.

Gov. Parris N. Glendening, who wants a 10 percent cut in income taxes, remained committed to his own plan, hoping he might revive a failing effort to double the state's 36-cents-a-pack tax on cigarettes.

That proposal, already dead in a Senate committee and facing uncertain prospects in the House, would raise $100 million to help pay for an income tax cut.

Though he was not willing to give up on the tobacco revenue, Glendening had complimentary things to say about the House leadership's latest plan.

"He appreciates them taking the additional [telecommunications] taxes off the table, and commends them for that," said Judi Scioli, the governor's press secretary.

"A tax cut is very much alive and on the table."

Senate President Thomas V. Mike Miller, who has been skeptical about the need for a tax cut, said he was keeping an open mind on the House plan.

"It depends upon the cuts in the budget," Miller said.

"Whether it's an affordable plan depends on the ability to make the budget cuts commensurate with the tax cut."

The change in direction is the latest twist in a tortuous process in which Democratic leaders in the State House have wrestled with the policy and politics surrounding an income tax cut.

Last week, Taylor proposed a 10 percent income tax cut, with some of the lost revenue to be made up by higher taxes on phone service and new taxes on Internet access, cable television and direct broadcast satellite.

The plan hit immediate opposition from Glendening and many Democratic lawmakers.

Until yesterday, Taylor had left open the possibility of raising some taxes.

But after counting heads, it was clear that his plan, as originally constituted, could not pass in the Democratically controlled House.

Taylor said lawmakers were wary of their opponents' potential campaign sound bites.

"It's all symbolism, and the symbolism of cutting taxes a lot is not as powerful as the symbolism of raising other taxes a little," said one House Democratic leader.

The new plan would cut income taxes by 3 percent next year and 4 percent the following year.

Unlike Glendening's proposal to cut the top rate by 10 percent, the House plan would combine some reduction in the state's top 5 percent rate with an expansion of tax brackets.

That approach would spread more tax relief among lower- and middle-income Marylanders than would Glendening's rate cut, which tends to favor those with the highest incomes.

But even that more populist proposal has left some Democrats cold.

"The country is swinging too far toward the rich, and Maryland is leading the way," said Del. Elizabeth Bobo of Howard County.

She and at least nine other Democrats have vowed to oppose any tax cut, and that number could grow, lawmakers said.

In changing their approach to the tax cut, House leaders have come very close to accepting the Republican worldview.

The GOP has proposed a 6 percent cut for the coming year, paid for entirely with budget savings, and Republican leaders wasted no time in taking credit for the Democratic shift.

"I'm ecstatic," said Del. Robert H. Kittleman, the House GOP leader. "We've driven this thing since day one."

Democrats believe, though, that the GOP's plan will strike most Marylanders as too severe -- and are eager to have their opponents stand up publicly to defend cuts in programs they think Marylanders want.

Kittleman and most of his 40 colleagues in the 141-member House want to cut enough to permit their tax cut in a single year, rather than in two as the Democrats are proposing.

Thus, Republicans will present a list of $148 million in reductions at an unusual session this afternoon.

They have said they plan to continue offering 6 percent tax cuts until they have achieved a 24 percent cut.

Conversely, the House Democrats are calling now for almost no spending reductions for next year, as the bulk of the income tax cut would not take effect until the following year.

Democrats are likely, however, to accept some GOP recommendations to retain their budget-cutting credibility.

Among their bigger cuts, the Republicans would decrease the state's so-called Sunny Day Fund -- used to attract new businesses to Maryland -- from $27 million to $5 million.

The GOP has also proposed a series of what are almost symbolic cuts, when looked at in the context of the state's $15 billion budget.

For example, the GOP would eliminate Glendening's proposed $300,000 grant to the George Meany Center for Labor Studies in Silver Spring. And it would save $200,000 by keeping the governor's yacht docked.

While Democrats say such cuts are too small to have much effect, Republican leaders say they are meaningful.

"The Democrats talk a good game, but when they face the hard reality of restraining growth of government, they get weak in the knees," said Del. Robert L. Flanagan, the House Republican whip.

Pub Date: 3/05/97

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