Maryland's first income-tax cut 10 percent less: Democrats seek political edge

Republicans seek smaller government.

April 06, 1997

IT MAY NOT have been smart budgeting or the best way to draw businesses to Maryland, but elected officials in Annapolis have jumped on the income-tax cut bandwagon with great alacrity. Gov. Parris N. Glendening and Democratic legislators think they have stolen a key campaign issue from the Republicans, who in turn see this step as a sure-fire way to shrink the size of state government.

Over the next five years, taxpayers will see very modest reductions in their state income-tax levy -- 2 percent a year, or a total of 10 percent. For a family of four earning $40,000, it will mean $52 in savings next year, and $291 in 2002. Such a gradual shrinkage of the government's tax bite may not be noticed by many citizens.

Governor Glendening's original plan called for all the reduction to come off the top tax rate of 5 percent as a way to appeal to business leaders when they relocate. But both the House and Senate demanded that lower- and middle-income citizens get much of the relief instead. Thus, the top rate will drop only 5 percent -- to 4.75 percent -- and the personal exemptions that affect every filer will be doubled, to $2,400.

Whatever the motives of politicians, tax relief is always welcome. It sends a message that elected leaders are serious about trying to minimize government spending and the squeeze on Marylanders' wallets. Regardless of the size of the reduction, it also tells business executives that Maryland is determined to lower its income-tax levy on a consistent basis. An added benefit is an amendment giving manufacturers a tax break when they buy equipment or materials used directly in production.

But this advance comes with some caveats. Can this state's economy generate enough new revenue between now and 2002 to compensate for lower income-tax receipts? What if there's a period of stagnation or recession in a few years? Will this tax cut place local education aid in jeopardy as future elected leaders scramble to find ways to plug the $500 million revenue hole caused by the lower tax rate?

For the first time since the inception of Maryland's income tax in 1937, citizens will see a reduction in the permanent rate -- for five straight years. This will put great pressure on the governor and legislators to narrow the scope of government programs and aid to localities, especially in the final years of this phase-in. That is why 24 liberal delegates from Baltimore City and Howard, Montgomery and Prince George's counties voted against the bill on final passage. But Mr. Glendening and other lawmakers were trying to please their constituents -- and deal with the consequences later.

Pub Date: 4/06/97

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