Taylor calls for review of taxation State House speaker says structure of levies is unbalanced

April 12, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

Four days after a Maryland General Assembly session that produced a first-ever income-tax cut, House Speaker Casper R. Taylor Jr. yesterday renewed his call for a thorough examination of the state's entire tax structure.

Addressing a conference in Baltimore, the Cumberland Democrat said the state's income-tax burden is the fourth-highest nationwide. He said the corporate tax burden is the fifth-lowest and the sales-tax burden is the sixth-lowest.

"That suggests to me it needs some rebalancing," said Taylor, a potential rival of Gov. Parris N. Glendening.

Taylor and Glendening had both proposed increasing other taxes to make up some of the $500 million in annual revenue the state will lose once the five-year income-tax cut takes full effect.

The governor proposed doubling the state tax on cigarettes, while Taylor and other House leaders proposed increasing taxes on some telecommunications services, such as cable television and Internet access. But the Democratic-controlled Assembly passed only a 10-percent income-tax cut, to be phased in over five years.

Yesterday, Taylor repeated his long-held criticism of the state's sales tax. He said it collects revenue largely from a declining manufacturing base and bypasses growing high-technology, telecommunications and other industries.

"We need to look at the way our consumption tax is applied to see whether or not it is fair," he said after his speech. "Forty-five other states have higher taxes or broader taxes. Are we applying our sales tax to the right segment of the economy?"

The state's 5-percent sales tax rate brings in more than $2.1 billion a year. Early this year, Taylor said he wanted to broaden the base and reduce the rate. Expanding the tax base would offset a rate cut, since every one-quarter of a cent of sales tax is roughly equivalent to $110 million in revenue.

Yesterday, he said he wants an analysis of the state's tax structure, not any specific outcome.

Tom Saquella, president of the Maryland Retail Merchants Association, said the low sales-tax burden results more from a narrow base than from a low rate. He said the 5-percent sales-tax rate is in the middle of the pack nationally.

'Bait and switch'

He said retailers objected to a bill expanding the sales-tax base this year because revenue would have been used to offset the income-tax cut. That bill amounted to a "bait and switch" play, he said.

"To this point, we have not supported tax-base expansion," he said. "If it was revenue-neutral, we would take a serious look at it."

Saquella said proposals to expand the tax base encounter trouble because the sales tax, inher- ently regressive, becomes even more so. "If you tax dry cleaning, if you tax haircuts, then you're getting regressive," he said. "That's the problem."

Michael Conte, director of the Regional Economic Studies Institute at Towson State University, called a review of the state's tax structure a good idea. Such a review would "elucidate finally whether it's pro- or anti-business, progressive or regressive," he said. "Quite honestly, I would say there's more myth about the Maryland tax structure than factual information."

He said the tax structure is generally business-friendly. "We probably are bordering on having a structural deficit now," he said. "And it's important to identify and decide which revenue sources can be increased, and, on the other hand, which spending can be reduced."

In his speech, Taylor called brownfields legislation, which is aimed at promoting reuse of abandoned industrial sites, a "permanent bridge" between the environmentalists and businesses.

Promoting business

He said components of a "pro-business" legislative session included legislation that will cut income taxes, speed permitting and provide relief for manufacturers from the sales tax on equipment purchases.

In his speech, Taylor also highlighted his other differences with Glendening. He said he opposed the governor's proposal to increase tobacco taxes. He also said he fought off Glendening's HOPE college scholarship initiative, which was intended to help low- and middle-income Maryland families pay the cost of college tuition.

He said he would prefer spending money on the kindergarten to 12th-grade population of children put at risk by drug addiction, domestic violence and poverty.

Pub Date: 4/12/97

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