Md. likely to get new '98 tax cuts Democrats would accelerate five-year, 10 percent reduction

Revenue exceeds estimates

Proposal could widen the state tax credit for the working poor

March 11, 1998|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

State revenues are pouring in at such a robust pace that Marylanders will likely enjoy a new round of tax cuts this year, key lawmakers said yesterday.

Adopting a distinctly partisan tone on what could be the No. 1 pocketbook issue in this year's election, Gov. Parris N. Glendening and legislative leaders said they were working on a Democratic tax relief package to be enacted before the General Assembly adjourns April 13.

While no consensus has emerged, lawmakers said a tax plan would likely accelerate the five-year, 10 percent income tax cut passed last year and include new tax relief for the working poor.

Glendening told legislators that he now believes the state can afford to implement the 10 percent cut over three years instead of five. A similar Senate proposal would double the tax cut for 1998, then have lawmakers decide in 1999 how to phase in the rest.

"The Democratic leadership in the state will put together a very significant tax reduction package," said House Speaker Casper R. Taylor Jr. of Allegany County. "There's an unusually high piece of money sitting there on the table to deal with."

Fueling the discussions yesterday were new figures from the state comptroller's office showing that tax collections continue to exceed projections, thanks to the state's solid economy.

State revenues for this year and next are expected to be nearly $143 million more than was forecast three months ago, the Board of Revenue Estimates told the governor yesterday.

For the current budget year, which ends June 30, revenue estimates are now almost $70 million higher than in December, pushing the state's surplus to about $352 million -- a healthy cushion in a General Fund budget that totals $7.9 billion.

Officials expect revenue collections to hold steady and project that the state will collect an additional $73 million next year.

Nearly all of the unexpected growth is due to higher-than-expected income tax collections, officials said.

A spokesman for Glendening restated the governor's support for additional tax relief this year, but said more discussions would take place before a final package emerges.

"The governor and the Democratic leadership agree that, given these new numbers, this is an opportunity to return money to our citizens," said Judi Scioli, Glendening's press secretary.

Differing plans

In a key development, House leaders said yesterday that they probably would support a proposal to accelerate the income tax cut, the first phase of which went into effect Jan. 1. Under current law, state income tax collections are to be reduced 2 percent each year for five years.

A bill backed by Senate leaders would double the tax reduction for 1998 to 4 percent. The change would mean an additional $52 in 1998 tax savings for a typical family of four with income of $40,000.

The proposal calls for another 2 percent cut next year. The Assembly would reassess the state's fiscal picture in 1999 to determine how to phase in the remaining 4 percent cut.

House and Senate leaders also expressed support for a proposal to widen a tax credit available to low-income Marylanders.

Under a formula that considers family size, income and other factors, Maryland gives low-wage families a credit that reduces or eliminates their state tax bill. But unlike the federal government, if the credit is greater than taxes owed, the state does not send them a check.

Pending legislation would make a portion of that credit refundable at a cost of about $37 million a year to the state.

Making work worthwhile

"You really have to figure out how to make people understand it's worthwhile to be in the work force," said Sen. Barbara A. Hoffman, who chairs the Budget and Taxation Committee and is the Senate sponsor of the tax credit legislation.

Under the proposal, a single parent with two children who earns $9,828 a year would receive a $548 payment from the state.

The Baltimore Democrat also discussed giving a little tax relief to the very rich by putting a cap on the capital gains tax paid for any one transaction. Hoffman said it would be "a way to say to rich people, 'We'd like you to stay here and do your philanthropy here.' "

House and Senate leaders disagree over a proposal by Taylor that would call on state officials to trim 5 cents from the state's 21 cent property tax rate next year.

The proposal, which has been approved by the House of Delegates, would save state property owners $58 million, but is being resisted by Glendening and Senate leaders.

"We're not going to do property tax," Hoffman said flatly yesterday.

Republicans react

Republican legislators, who have made tax relief a key issue in recent years, credited Democrats with seeing the wisdom of tax cuts -- albeit slowly.

"The governor isn't leading the train, he's jumping on the caboose," said Del. James F. Ports Jr., a Baltimore County Republican.

And Sen. Robert R. Neall, an Anne Arundel Republican, said he would continue to push to increase the income tax cut to 15 percent, rather than accelerate the 10 percent reduction.

"Clearly, we can afford to accelerate it," Neall said. "My objective is to try to get it to 15."

Pub Date: 3/11/98

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