Tax cuts on fast track

Leaders support speedup of 1997 phased reduction

GOP plan expected later

Inheritance fee could be eliminated

credits proposed

January 26, 2000|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

Tax cuts took center stage in the General Assembly yesterday as lawmakers pondered ways big and small to return some of the state's bountiful surplus to taxpayers.

On the fast track are bills backed by legislative leaders -- one that would accelerate the five-year, phased-in 10 percent income tax cut passed in 1997, and another that would cut or eliminate the state's inheritance tax.

On a less certain track are an assortment of smaller tax cuts and credits.

One would exempt all earnings of active-duty military in Maryland from the state income tax while another would waive the sales tax on smoking-cessation products. A third would establish a tax-free week during which Maryland retailers would not collect the 5 percent sales tax on most clothing and shoes.

Most notably absent from the debate is major tax relief beyond the proposal to speed up the income tax cut -- an embarrassment, critics say, given the state's thriving financial condition and $1 billion budget surplus.

"This is `tax cut light' from the Democrats," said Del. Robert L. Flanagan, the House Republican whip. He said the House GOP would propose "meaningful" tax reductions later in the session.

Sen. Barbara A. Hoffman, chairman of the Senate Budget and Taxation Committee, said there appears to be little public call for major tax cuts beyond accelerating the 10 percent income tax reduction.

"We're getting no pressure at all to do it," said Hoffman, a Baltimore Democrat.

House Speaker Casper R. Taylor Jr. pushed his legislation yesterday to finish the income tax cut by 2001, a year ahead of schedule.

His measure would return an additional $196 million to the taxpayers over the next two years but would not generate any tax savings beyond 2001.

"Given the kind of prosperity we're dealing with we have the opportunity to finish the business we started three years ago on the income tax reduction," said Taylor, a Cumberland Democrat.

The income tax cut acceleration has won support from Taylor's Democratic leadership team in the House as well as from key Senate leaders. The major obstacle remains Gov. Parris N. Glendening, who is resisting major tax cuts during this year's 90-day session.

The state, he has said several times in recent weeks, needs the tax revenue to cover its many unmet needs.

Business groups and several legislators turned out to support Taylor's measure to abolish the state's inheritance tax, a bill that would return about $50 million a year to taxpayers.

"In many respects, it's a tax on money that has already been taxed," said Del. Adrienne A. Mandel, a Montgomery County Democrat. That measure is supported by House and Senate leaders, as well as Glendening.

With the state's budget in such strong shape, this might be the year that previously rejected measures get a longer look.

In that category falls the bill to create a tax-free week of shopping.

The legislation would set aside a week in August in which the sales tax would be waived on clothing and shoes costing less than $100. It would cost the state an estimated $6.4 million.

"I may have found the perfect bill," said Del. Jean B. Cryor, a Montgomery County Republican who is sponsoring the sales-tax measure. "The moms love it. The retailers love it."

Sen. Thomas M. Middleton, a ranking Democrat from Charles County, is sponsoring the same measure in the Senate, which has rejected similar bills the past two years.

"I predict something like that will pass the Senate," said Senate President Thomas V. Mike Miller. "There are certainly things that normally would not be considered in tough times or moderate times that are now on the front burner."

Hoffman acknowledged the appeal of the one-week sales tax holiday, which supporters say would be timed to give parents a break on back-to-school shopping.

But the state's lost revenue gives her pause.

"We could buy a lot of drug treatment for $6 million," Hoffman said. "I represent a subdivision that's dying because of drugs and crime."

Yet Hoffman herself is not immune from proposing a couple of sales-tax waivers of her own -- for smoking cessation products and for telecommunications equipment used to connect to the Internet.

Sun staff writer Timothy B. Wheeler contributed to this article.

Assembly hearings

The Sun is offering free fax delivery of Maryland General Assembly hearing schedules again this year. To use this service, you must have a fax machine capable of answering the phone automatically.

To subscribe to the service, call SunDial at 410-783-1800 and enter Code 6290. You'll be asked to leave your name, fax number and a daytime phone number. If you subscribed to the service last year, you must subscribe again this year to receive the schedules.

For a list of SunDial numbers in surrounding counties, see Page 2B.

Hearing schedules for the next week will be faxed every Friday night.

If you have an Internet connection, updated schedules are available every day on the General Assembly's Web site. Point your Web browser to http: //

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