Delay in tax cut is option

Legislative leaders, governor wrestling with revenue losses

`Looking at everything'

Final 2% installment of 10% reduction in personal levy at stake

November 27, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

The governor and General Assembly leaders, grappling with revenue losses in the face of a national economic downturn, are considering a delay in the last phase of a 10 percent personal income tax cut passed in 1997.

Michael Morrill, a spokesman for Gov. Parris N. Glendening, confirmed yesterday that a delay in next year's final 2 percent installment of the reduction is one of the difficult choices "on the table" as decision-makers strive to produce a budget that, under the state Constitution, must be balanced.

Maryland officials said a steep decline in revenues -- caused by the recession and compounded by the Sept. 11 terrorist attacks -- could imperil pay increases for state employees and a long-sought program to increase the salaries of workers who care for the developmentally disabled.

"We're looking at everything," Morrill said. "If current revenue projections continue, there will be painful choices, but they will not have to devastate human services, education and health care."

Morrill and legislative leaders said no decisions will be made before the state issues its next revenue projection in the middle of next month. Glendening is expected to meet with General Assembly fiscal leaders today to discuss their options.

Legislative budget analysts have predicted that if spending continues unabated and the tax cut scheduled for Jan. 1 goes into effect, the state's expenditures will exceed revenues by $1.7 billion in the current fiscal year and the next one, a period that runs through June 2003.

Morrill called that number a "gloom-and-doom scenario," promising that Glendening will submit a balanced budget maintaining the 5 percent reserve required by bond agencies for the state to keep its top-tier debt rating.

Delaying the tax cut would save the state an estimated $150 million in revenue next year, Morrill said. The impact on the average household, he said, would be less than $2 a week, or less than $104 a year.

Leaders of the Senate and House of Delegates agreed that the tax cut delay has to be considered.

"I believe promises made should be promises kept," said Senate President Thomas V. Mike Miller, adding that he believes the cut should be postponed only in dire circumstances.

"Obviously it's something that will be on the table. Certainly there's not going to be any taxes raised," the Prince George's County Democrat said. Nor will any taxes be cut, including an estate tax that many lawmakers would like to abolish, he said.

House Speaker Casper R. Taylor Jr. said the delay should be considered. "That's what fiscal responsibility is all about," he said.

The Cumberland Democrat said he is talking about a delay rather than a cancellation of the 2 percent cut. He suggested that the cut scheduled for next year could instead go into effect automatically when the economic recession ends.

House Minority Whip Robert L. Flanagan of Howard County said Republicans would oppose any delay in the tax cut.

"It is a shortsighted effort that doesn't address the fundamental problem we're facing," said Flanagan, blaming the expected shortfall on "irresponsible and extravagant spending" by Glendening and the Democratic-led legislature.

"The proposal to pull back on the promised tax cut is an effort to sweep the real problems under the rug until after the next election," Flanagan said.

Morrill said Maryland's budget woes are far less serious than those of almost every other state because of the state's "prudent" fiscal policies. He said other states have been forced to call special legislative sessions to make draconian budget cuts, cancel tax cuts and raise taxes just to balance the books in the current budget year.

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