Md. tax refund for poor likely House panel, Senate approve payments to low-income workers

'It's long overdue'

March 21, 1998|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

The General Assembly is moving toward approval of a major tax change that would send state refunds to tens of thousands of the working poor -- even though they paid no income taxes.

Under legislation approved yesterday by the Senate and a House subcommittee, many of Maryland's lowest-income workers would begin receiving the payments next year -- a move sought for more than a decade by advocates for the poor.

The measure, which would cost the state an estimated $18 million next year, would send a payment of $260 to a single-parent household of three earning the minimum-wage annual salary of $10,712, analysts said.

"We've been giving money to the racetracks and money to corporations," said Sen. Decatur W. Trotter, a Prince George's Democrat. "This gives working people a little bit of money -- not a lot, but nothing to complain about."

In other major votes that reflected the state's rosy fiscal picture, the Senate approved the state's $16.5 billion budget for next year with only minor cuts and passed a bill that would speed up the five-year, 10 percent tax cut that took effect Jan. 1.

The debate, though, centered on legislation that would make a portion of the state's "earned income tax credit" refundable.

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.

The bill approved yesterday would allow them to receive a payment of 10 percent of their federal credit. Five other states have similar laws.

The Senate-backed legislation could benefit about 210,000 workers with incomes below $14,000.

Sen. Barbara A. Hoffman, the bill's chief sponsor, said it would provide a financial incentive for people to stay in jobs and off welfare.

'Work has to pay'

"Our goal in welfare reform is to incorporate into our communities people who have been on the dole," said Hoffman, a Baltimore Democrat. "If reform is going to work, work has to pay."

Sen. F. Vernon Boozer of Baltimore County, the minority leader, was the only senator to express concerns about the bill. He said the refund essentially would be a new government handout.

"We're coming in the back door and creating a new entitlement program," Boozer said. "I'd rather give the money to the food banks or the nonprofits."

But Boozer said the issue forced him to make "one of the toughest votes" ever, and he ended up supporting the bill. The measure passed unanimously.

'Part of the mainstream'

Sen. Nathaniel J. McFadden, an East Baltimore Democrat, recounted in emotional tones how his mother scrubbed floors to get off welfare. "This bill gives [the working poor] an opportunity to be a part of the mainstream," McFadden said.

L Advocates for the poor applauded legislators after the vote.

"This will be meaningful for people trying to make the transition from welfare to work," said Richard J. Dowling of the Maryland Catholic Conference. "It's long overdue."

"It basically gives poor working families a boost," said Liz McNichol of the Center on Budget and Policy Priorities, a Washington research group.

House approval likely

Shortly after the Senate vote, a House Ways and Means tax subcommittee approved similar legislation that would provide higher benefits to low-income workers than does the Senate version.

The full committee is expected to approve the measure Monday. House leaders have endorsed the proposal, meaning approval is likely.

But some conservative delegates on the House panel will oppose the measure.

"It's a redistribution of wealth," said Del. James E. Rzepkowski, an Anne Arundel Republican. "People who don't pay taxes would be receiving an income tax refund. I don't think that's the way to go."

Supporters of the plan argue that the working poor, while they pay little in income tax, do pay levies such as sales tax.

"They don't pay income tax, but their tax burden is high," said Kevin Appleby, a lobbyist with the Maryland Catholic Conference.

Governor keeps 'open mind'

A spokesman for Gov. Parris N. Glendening said he has kept "an open mind" on the issue.

While the earned-income credit bill met no opposition in the Senate, a measure that would provide a tax break for some of Maryland's wealthiest citizens had a slightly harder time.

The bill, approved 36-9, would limit state capital gains taxes on the sale of out-of-state assets to $65,000, which would benefit anyone with such gains of more than $1.3 million in a year.

"This bill allows three or four of the wealthiest Marylanders to eat truffles at the state trough," said Sen. Paul G. Pinsky, a Prince George's Democrat.

Hoffman, who also sponsored the capital gains bill, said the measure was designed to create an incentive for the wealthiest Marylanders to remain in the state and continue to make philanthropic contributions.

Pub Date: 3/21/98

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