$23.6 billion budget approved by Senate

Plan would tap reserve accounts, revive snack tax

General Assembly

March 20, 2004|By David Nitkin | David Nitkin,SUN STAFF

The Maryland Senate approved a $23.6 billion state budget yesterday that taps reserve accounts for hundreds of millions of dollars and imposes a sales tax on salty snack foods.

The House of Delegates, meanwhile, is embarking on a different direction that could include a 1-cent sales tax increase or a surcharge on the state's wealthiest residents.

House Democrats plan to meet Monday in an effort to reach consensus on taxes needed to close a projected budget gap and pay for a landmark public schools program.

"We have a menu of things we're looking at," said House Speaker Michael E. Busch, who favors raising the state's sales tax from 5 cents on the dollar to 6 cents. Other delegates are unsure, and Gov. Robert L. Ehrlich Jr. has promised to veto income or sales tax increases.

"What's not on the menu?" said Del. Kumar P. Barve, the House majority leader from Montgomery County. "We're going to be looking at all our options," he said, including an income tax surcharge on wealthy residents and deep spending cuts.

Barve said he was uncertain, however, whether liberal and conservative members of the Democratic caucus would reach agreement.

The Senate completed its budget work yesterday, approving a spending plan by an unusual unanimous vote. Companion bills that help balance the budget were more contentious, however. Republicans voted as a bloc against a budget-balancing bill which reinstituted the 5 percent sales tax on snack foods that was repealed in 1997. The measure would raise $16 million yearly.

Sen. Patrick J. Hogan, a Montgomery County Democrat and vice chairman of the Budget and Taxation Committee, was incredulous that his colleagues supported some parts of the package but not others.

"How do you vote for the budget, but vote against a way to pay for it?" Hogan said. "It's a great way to have it both ways."

But Sen. E.J. Pipkin, an Eastern Shore Republican, said he could not support the budgeting-balancing bill because of the levy on snack foods. "It has taxes in it," Pipkin said. "I'm not a tax guy."

Senators argued longest over an Ehrlich-sponsored bill to close loopholes used by corporations that transfer assets to shell corporations in Delaware and other states to avoid corporate taxes here.

Republican critics said the bill was too aggressive, and would drive jobs out of the state.

"I am sure we are going to be back to change this one," said Sen. J. Lowell Stoltzfus, the Senate Minority Leader from the Eastern Shore. "Businesses are going to be fleeing this state."

Sen. Paul G. Pinsky of Prince George's County countered that companies who are using the loopholes are engaging in "corporate theft."

Support for the loophole bill grew after the state comptroller's office won court cases against companies that were shifting assets to Delaware. But Comptroller William Donald Schaefer said the bill passed by the Senate was weaker than what he wanted because it granted amnesty to companies which owe taxes but haven't paid them yet.

"An amnesty just completely undermines all the efforts made by this agency over the last several years and sends the wrong message to businesses out there that if they wait long enough, they can get away with it," said Michael Golden, a spokesman for Schaefer.

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