State tax cut gains favor

Assembly leaders weigh 2-year speed-up in planned reductions

`We can absorb this'

With $1 billion surplus public deserves a break, Senate's Miller says

January 07, 2000|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

Facing an embarrassment of budget riches, Democratic leaders of the General Assembly are warming to the idea of a tax cut this year.

Leaders in the Senate and House of Delegates said yesterday that they would support accelerating the 10 percent income tax cut enacted in 1997 and scheduled to take full effect in 2002. More than half of that cut, 6 percent, has gone into effect.

One idea is to have the Assembly make the full 10 percent reduction effective this year, two years early, saving Maryland taxpayers an estimated $310 million over the next two years. A typical family of four with an adjusted gross annual income of $40,000 would save about $130 in state taxes this year, according to legislative analysts. A family of four with an income of $100,000 would save about $190.

"I think the public would expect this of us," Senate President Thomas V. Mike Miller said. "It's not to gain favors. It's simply to return moneys to them that are not needed at this time."

Miller and House leaders said the state, with a budget surplus of more than $1 billion, is positioned well to help taxpayers.

"Given the revenue coming in, we can absorb this," said Del. Howard P. Rawlings, chairman of the House Appropriations Committee.

Sen. Barbara A. Hoffman, chairman of the Senate budget committee, said she, too, wants to speed up the tax cut but might favor doing it over two years instead of one.

"I have one priority for myself, that is accelerating the income tax reduction," said Hoffman, a Baltimore Democrat. "Maybe this year and next and be done with it."

Gov. Parris N. Glendening has resisted talk about additional income tax cuts but appears to be leaving the matter in the hands of the Assembly.

Later this month, the governor will outline his proposed state budget, a plan likely heavy with spending on such one-time construction projects as school and college buildings -- projects dear to legislative hearts.

A spokesman for the governor said the legislature would have to figure out how to cut the budget to absorb the lost revenue from speeding up the state income tax cut.

"The governor's budget is based on the unique opportunity to make one-time investments," said spokesman Michael Morrill. "Any change in his priorities would require taking something off the table."

Thoughh cool to additional income-tax cuts, Glendening has agreed to support a separate proposal supported by Assembly leaders -- to cut or eliminate the state's inheritance tax, which would save taxpayers more than $50 million a year.

The tax-cut legislation enacted in 1997 was to shrink income tax collections by 2 percent a year from 1998 through 2002.

But with state revenues soaring beyond projections in 1998, the Assembly increased the cut to a full 5 percent that year.

The income tax was cut an additional 1 percent last year. The revised law calls for no tax reduction this year and 2 percent cuts in 2001 and 2002.

A final decision on cutting the income tax further is unlikely until late March, when revised state revenue figures are released.

While they consider accelerating the last two 2 percent cuts, legislative leaders are leery of going beyond the total 10 percent reduction. "I'd like to finish up what we started before we do another one," Hoffman said.

Legislators have been startled by the state's revenue collections, which in the past year have repeatedly zoomed past growth projections. Most recently, state officials said the state will have a surplus of more than $1 billion out of a general fund budget of about $9 billion.

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