Hopes wither for a cut in state income taxes

Surplus should go to improving schools, key lawmakers say

March 15, 2000|By Gady A. Epstein | Gady A. Epstein,SUN STAFF

The General Assembly will not cut income taxes this year despite having a $1 billion surplus, key lawmakers said yesterday. They said the state should instead spend its riches on education and other priorities.

Their assessment was made after state officials announced that Maryland's fiscal picture -- while still rosy -- isn't getting rosier. The release of revenue projections for the next few months dashed remaining hopes to cut income taxes this year.

"You can't spend and cut at the same time. It's very basic," said Senate President Thomas V. Mike Miller, making clear an income tax cut will not be approved. "Prudent money management dictates we follow the safest course, which means investing in education."

The Assembly passed a 10 percent income 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.

Top lawmakers said at the outset of the 90-day session that they hoped to speed that schedule to provide a cut this year.

But the governor and legislators found more than enough ways to spend the surplus, leaving no room for a tax cut. Some had held out hope the March revenue estimates would show the state collecting more money than expected.

The three-member Board of Revenue Estimates -- Comptroller William Donald Schaefer, Treasurer Richard N. Dixon and Budget Secretary Frederick W. Puddester -- has grown accustomed to seeing revenues outpace expectations the past few years.

But members said yesterday that tax collections this year might be slightly less than expected, giving state officials a sense of caution rare in this booming economy.

Gov. Parris N. Glendening pointed to the mediocre estimates as justification for his decision to devote much of the surplus to one-time expenses rather than tax cuts. He has proposed spending more than $600 million on building and renovating public schools and on higher education projects.

"We cannot afford to assume that surpluses will continue," the governor said.

A typical family of four with an adjusted gross income of $40,000 would have saved $59 to $127 on its taxes for 2000 if proposals to accelerate the tax cut were approved. Those proposals would have cost the state between $145 million and $250 million next fiscal year.

Legislative leaders were quick to point out they expect to reduce or eliminate Maryland's inheritance tax this year, saving those taxpayers up to $50 million.

But their Republican critics said proposals to speed the income tax cut fell victim to the Democratic majority's thirst for spending.

"It's a liberal body, and they love to spend money," said Howard Del. Robert H. Kittleman, House minority leader. "It's a tax-and-spend state, and they're being true to their beliefs."

Glendening and top lawmakers say they're doing what the public wants. A poll taken last month found that 59 percent of likely voters prefer the surplus be spent on "pressing priorities" such as education.

"There are tremendously popular major investments about to be made in our future regarding education, health care and transportation," said House Speaker Casper R. Taylor Jr.

Legislators are looking for more money from the governor for schools. Glendening has proposed spending $35 million on a state-supported teacher pay raise, and Baltimore lawmakers are hoping for millions more for the troubled city school system.

"The No. 1 issue with the public at this time -- and for some time -- is improvements in education," Miller said. "We're going to make that commitment."

Sun staff writers M. Dion Thompson and Thomas W. Waldron contributed to this article.

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