Panel votes 7% cut in income tax House of Delegates bill offers child credit to lower-income families

'Couldn't afford the 10%'

Full House seen likely to approve measure

fate in Senate unclear

March 13, 1997|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

Ending weeks of back-room wrangling over the shape and size of tax relief, a House of Delegates committee approved a bill last night that would cut Maryland's income tax by 7 percent over the next two years.

The bill combines a modest, across-the-board cut in the rate paid by all Maryland taxpayers with a child tax credit aimed at low- and moderate-income families.

"All taxpayers get a tax cut under this proposal," said Del. James C. Rosapepe, a Prince George's County Democrat who helped craft the bill. "Those who need it the most get the largest cut under this proposal."

Under the bill, a typical family of four with a gross income of $40,000 would see its annual income tax bill of $1,440 drop by $334.

By contrast, a family of four with a gross income of $100,000 would see its $4,140 tax bill drop by only $117, according to the legislature's fiscal analysts.

The bill, which has the blessing of House Speaker Casper R. Taylor Jr., an Allegany County Democrat, passed the Ways and Means Committee 20-0, with two of the committee's seven Republicans abstaining.

The measure now goes to the full House of Delegates, where passage seems all but assured, given the bipartisan support it won in committee.

Prospects in the Senate, however, are uncertain.

Many senators would like to enact tax relief this year, but others -- including Senate President Thomas V. Mike Miller, a Prince George's Democrat -- say they are not sure the state can afford it.

Asked about the bill late yesterday, Gov. Parris N. Glendening said he had not been briefed and deferred comment.

Glendening and Taylor had proposed cutting income taxes by 10 percent by reducing Maryland's 5 percent rate -- a top priority of the state's leading business groups.

Those proposals, however, ran into opposition from liberals who worried that such a cut in state revenue would hurt essential state services.

Conservatives, meanwhile, objected to raising other taxes to "pay" for an income tax cut -- something that Glendening and Taylor proposed.

But Taylor and other House leaders spent the past two weeks finding consensus on a measure that would cut taxes by a smaller amount, targeting relief to lower-income families -- and // without raising other taxes.

Del. Clarence Davis, a Baltimore Democrat, said that while the governor's original proposal was designed to send a pro-business signal, the 10 percent tax cut was too big.

"We couldn't afford the 10 percent," Davis said. "But we're trying to send a message."

The tax cut, once fully enacted, would mean a loss of some $300 million in revenue annually from the state's $8 billion general fund. House leaders say they will cut the state budget to make up for the loss.

No breakdown available

Del. James F. Ports Jr., a Baltimore County Republican, voted for the bill but said he did so reluctantly because he did not have a breakdown of how the tax relief would be spread among income groups.

But it is clear, Ports said, that the bill would not provide a 7 percent tax cut for all Marylanders.

"Many families will only get a 2 percent cut this year and a 4 percent [cut] next year," Ports said.

Under the bill, the state's tax rate of 5 percent on income of more than $3,000 would drop to 4.9 percent next year and 4.8 percent in 1999.

Families with incomes under $25,000 would receive a $350-per-child tax credit. Families with larger incomes would receive a smaller credit, with the credit phasing out entirely for those earning more than $45,000.

Echoing the federal earned-income tax credit, the Maryland child credit would be refundable to families filing income tax returns even if the credit exceeded their tax liability.

Lower personal exemptions

In another effort to make the tax system more progressive, Maryland families with incomes of more than $150,000 would see their personal exemptions reduced, meaning they would receive less relief from the bill's tax-rate cut.

The committee did not have a breakdown of how the tax relief would be spread across income brackets, but Rosapepe said that roughly half of the tax savings would go to families earning more than the state's median income.

A higher percentage of the tax savings would have gone to that group under Glendening's bill.

While the issue of a tax cut has percolated in the committee for several weeks, the final version from the panel's Democratic majority emerged with little warning yesterday afternoon.

Republicans on the committee grumbled about the rapid pace, but Democrats on the panel said that none of the final bill's components were new concepts to the members.

Pub Date: 3/13/97

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