Tax, fee package gets House panel's OK

Ehrlich's view unknown on $225 million proposal

March 18, 2003|By David Nitkin | David Nitkin,SUN STAFF

A House Ways and Means subcommittee gave preliminary approval yesterday to a $225 million package of tax and fee increases and tax loophole-closing measures that would provide more than enough money to balance the House version of the state budget.

The proposal goes significantly further than increases endorsed late last week by Gov. Robert L. Ehrlich Jr., and the administration would not immediately say whether the ideas were acceptable.

"Nothing has been taken off the table at this time," said Henry Fawell, a spokesman for Ehrlich. "The governor and senior staff want to take in what specifics the committee has adopted. His proposal from last week is his preference here."

On Friday, Ehrlich proposed an increase in annual corporate filing fees to raise $85 million for the budget. Yesterday, the tax subcommittee bumped that figure to $125 million, increasing the fees to be paid by companies with at least 500 employees to $20,000 - twice what the governor proposed.

Business leaders told Ehrlich they would rather pay higher annual fees than see corporate income taxes increased or certain loopholes closed.

Still, the subcommittee voted to close many of the loopholes under consideration, including taxing companies that shift trademarks and other intellectual property to shell corporations in Delaware. Delaware does not tax income derived from intellectual property.

The loophole-closing ideas would yield about $45 million yearly, analysts estimate.

The subcommittee also approved a new 2 percent tax on insurance policies written by health maintenance organizations to generate $45 million. Currently, those policies are untaxed.

Some Republicans on the committee said they hope Ehrlich takes a dim view of the package.

"It goes too far," said Del. Robert A. McKee of Washington County. "If there's somebody we haven't taxed, we found them in this bill."

But Del. Sheila E. Hixson, committee chairwoman, said she avoided sales and income tax increases, which the governor said he would veto.

"I'm certainly dealing with the art of the possible," the Montgomery County Democrat said.

On Saturday, the House Appropriations Committee gave final approval to a $22.6 billion state budget that relies on $175 million in additional new revenues to balance. Del. Howard P. Rawlings, chairman of the House Appropriations Committee, released a $200 million list of "doomsday" cuts he said he would be forced to take if the Ways and Means Committee did not vote on taxes.

Hixson said the new tax ideas would be rolled into a single bill, and the state budget would be contingent on that bill being passed.

The full committee is expected to vote on the tax bill today.

If Ehrlich vetoes the measure, the General Assembly would have to make deeper program cuts or find acceptable revenue sources.

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