Senate's budget would tax snacks

Panel adopts $23.6 billion plan restoring state levy

General Assembly

March 13, 2004|By David Nitkin | David Nitkin,SUN STAFF

Potato chips, pretzels and cheese puffs would be taxed for the first time in seven years under a $23.6 billion spending plan adopted by a Maryland Senate budget committee yesterday that has drawn the ire of Gov. Robert L. Ehrlich Jr.

Senators said they need to restore a sales tax on snack foods to raise $16 million yearly, and generate $143 million through a variety of other business-related tax code changes because Ehrlich underestimated the cost of mental health, Medicaid, foster care and other items in his proposed budget.

State budget Secretary James C. "Chip" DiPaula Jr. said Ehrlich opposes the snack tax because it violates the governor's pledge not to raise sales or income taxes. But he stopped short of saying the governor would veto the massive budget-balancing bill that now contains it.

"We don't think these revenues are necessary," DiPaula said. "We think the governor's budget was addressing the state's needs for 2005."

In broad terms, the committee's budget plan -- expected to receive full Senate approval next week -- largely follows the proposal submitted by Ehrlich in January. It relies heavily on transfers and other one-time fixes to close a gap between revenues and expenses of about $800 million.

With few new taxes and the continuing mandates of a $1.3 billion public school reform package, budget analysts said that the state still faces a $1 billion revenue gap for 2006. Lawmakers concede that for the third straight year, they appear to be pushing the state's problems into the future.

The state budget is balanced, said Sen. Patrick J. Hogan, vice chairman of the Budget and Taxation Committee. "But it's not structurally fixed." The Montgomery County Democrat added, "Nobody is willing to bite the bullet and do what needs to be done once and for all."

The Senate committee rejected Ehrlich's proposal for a $1,200 fee on nursing home beds -- much of which would have been reimbursed by Medicaid -- and also restored $30 million to localities tha thave utility companies that are exempt from some taxes. Ehrlich had proposed cutting the grants.

The committee also approved yesterday an Ehrlich-backed bill to close a tax loophole used by corporations who shelter income in Delaware.

But Republicans said amendments to the Delaware-loophole bill went too far. "I think the bill is very anti-business," said Sen. J. Lowell Stoltzfus, an Eastern Shore Republican.

The sales tax on snack foods was removed in 1997, after Frito-Lay Inc. promised it would add jobs to a plant in Harford County. But the additional jobs never materialized, lawmakers said.

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