State is cool on tax cuts

General Assembly puts projects above tax help with surplus

`No enthusiasm ' for trim

Governor's lobbying deters speeding up phased-in reduction

March 02, 2000|By Gady A. Epstein | Gady A. Epstein,SUN STAFF

Although legislative leaders began the General Assembly session saying they hoped to cut income taxes this year, top lawmakers now say there is little support for the idea.

"There's no enthusiasm for it," said House Speaker Casper R. Taylor Jr., who introduced legislation to provide a cut.

"It might not be the best thing to do," said Sen. Barbara A. Hoffman, chairwoman of the Senate budget committee. "There's no groundswell for doing it at the moment."

The Assembly approved a 10 percent tax cut in 1997 that is being phased in. More than half of it -- 6 percent -- has taken effect, but no further reduction is scheduled until next year.

Lawmakers had talked of speeding up that schedule to provide a cut this year -- and they still don't rule that out. But they have come up with so many ways to spend the state's $1 billion surplus, they say there may be no money left for income tax relief.

"There's an overwhelming support for increased education spending, increased health care spending, increased transportation spending, and there is not going to be room for the acceleration," Taylor said.

While Taylor, Senate President Thomas V. Mike Miller and Gov. Parris N. Glendening have agreed to reduce or eliminate Maryland's inheritance tax, Glendening has opposed speeding up the income tax cut.

The governor argues the state has a responsibility to spend its $1 billion surplus on a host of unmet needs, particularly education. He has proposed a record $364 million in higher education construction projects, $256 million for building and renovating K-12 schools, and double-digit percentage increases for many state programs.

Marylanders seem to agree with the governor's stance, according to a recent Potomac Survey Research poll. It found that 59 percent of likely voters prefer that the surplus be spent on "pressing priorities," such as education, rather than tax cuts.

A number of lawmakers also have seemed to warm to the governor's reasoning. They have come up with hundreds of millions of dollars in requests for spending above and beyond the surplus.

Tobacco scuffle, too

This year's $150 million take from the national tobacco settlement also has inspired a legislative scuffle over a wide range of requests, from $10 million for nurses and health aides in public schools to $2.5 million for counseling and caring for ex-convicts.

"I don't think that people thought we were going to have this feeding frenzy," said Del. Sheila E. Hixson, chairwoman of the House Ways and Means Committee.

Hixson said she believed that with so many requests for projects, the governor's position on taxes has become especially influential. She noted he has great control over whether legislators' pet projects are funded.

"He says, `Would you like this building? Then I certainly wouldn't like your vote on tax cuts,' " Hixson said yesterday. "You could just sit outside the governor's office. When they went in, they'd probably be for [the tax cut], and when they come out they're probably against it. The attitude is changing when their wishes come true."

State revenue estimates eyed

Legislators in both houses cautioned that the outlook for the income tax cut could change again when new state revenue estimates come out in the next two weeks. If the state is collecting far more money than expected, there may yet be room for a reduction this year.

"The Senate is still going to give it full consideration," Miller said. "Fiscal conservatives are going to say, `If you're going to spend an unprecedented amount of money on projects, it's important that you also consider that this money belongs to the public.' "

Bills filed by Miller and Taylor would speed up the 10 percent tax cut, either by making the remaining 4 percent effective this year at a cost to the state of nearly $250 million, or by providing a lesser reduction at a cost of $145 million.

A typical family of four with an adjusted gross income of $40,000 would save from $59 to $127 in taxes this year.

Spending requests swell

For now, the bills are on the back burner. Lawmakers are awaiting the new revenue estimates, but so far the sheer volume of spending requests has surpassed even the state's growing riches.

"I think it would be very difficult to accelerate the income tax reduction given the demands on the budget being sought by members of the legislature," said Del. Howard P. Rawlings, chairman of the House Appropriations Committee.

Glendening proposed a supplemental budget Monday that included $5 million to help Baltimore fight lead-paint hazards in aging homes and apartments, as well as $35 million to fund state-supported teacher pay raises. Future supplemental budgets are expected to pay for projects sought by legislators and others around the state.

"When you put it all down in black and white on paper, which are you going to choose, projects or tax cuts?" Hixson said. "Well, it's going to be projects."

`Tax cut already in law'

Taylor pointed out that even if a tax cut acceleration doesn't happen this year, Marylanders will still see their income taxes go down in coming years.

"The 10 percent tax cut is already in law," Taylor said. "It's not like it's not happening. It is happening."

Sun staff writer Thomas W. Waldron contributed to this article.

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