Tax Structure

SYKESVILLE -- Gov. William Donald Schaefer said yesterday that he intends to cover the state's current budget deficit without raising taxes and does not plan to propose a tax increase to balance next year's state budget.Mr. Schaefer, who made his remarks during a campaign swing on behalf of Democratic candidates for the state Senate in Washington and Carroll counties, said he was not precluding a possible increase in the state gas tax, whose revenues go directly into the transportation fund.

THE FUTURE of Baltimore city is at stake. If lawmakers in Annapolis continue to treat Maryland as a commonwealth of small nations rather than one state joined by economic, social and moral bonds, Baltimore city faces a continuing decline in funds for education with no real hope of reducing its disastrously high property tax rate. Poor public education and high property taxes will further spur the flight of middle-class white and black families.The danger lies in the fact that one measure that is likely to be considered as a "quick fix" for the state's current financial crisis is particularly bad for Baltimore city.

The Supreme Court is about to take up a case that could change the world for municipal bond investors and make financing more expensive for some state and local governments. The court will hear a lawsuit on Nov. 5 by two Kentucky investors who say it's unfair for that state to exempt its own bonds from state income tax while taxing the interest generated by other states' bonds. That has long been standard practice in this country, and it in effect creates a captive audience for a state's IOUs.

Faced with a precipitous plunge in tax revenues and rising social service costs, state legislators Monday chose to sidestep fundamental tax-and-spending questions in favor of a wobbly, jerry-built budget-balancing act that could leave the state a half-billion dollars in debt in 1992.The $11.6 billion budget approved by the General Assembly gets the government through the next 12 months -- barely -- by draining the state's reserve funds, tinkering with a handful of minor taxes, denying pay increases to state workers and keeping overall program spending increases to near-zero.

Annapolis. -- Of course a hasty tax cut in a shaky economy would be ''fiscal folly,'' as your editorial (March 12) contends. But that does not mean that any tax cut is bad.The premise for a tax cut is that the revenue stream of our existing tax structure asks too much from our citizens to pay for needed services. In 1991, our tax structure could not handle the expansion of services made necessary by the recession, so we asked more from our citizens through a personal tax increase that expired when the recession was over.

Before naysayers dismiss the recommendations of the Linowes commission to revise Maryland's outmoded tax structure as just another gimmick to hike everyone's taxes, they should take a close look at the group's suggestions. Yes, they are bold. Yes, they are controversial. But above all, they are sensible and compelling.This commission, composed of some of the state's best -- and most impartial -- minds, discovered some unpleasant truths about Maryland's tax system. It is unfair. It favors the rich and penalizes the middle class.

House Speaker Casper R. Taylor Jr. is expected to propose state legislation targeting for-profit health maintenance organizations and telecommunications companies for higher taxes -- part of an effort to pay for his proposal to cut personal income taxes.The package will not include a plan to reduce Maryland's sales tax rate -- a proposal Taylor floated on the opening day of this year's legislative session.The speaker is expected to describe plans for the two tax increases at a press briefing this morning, where he will formally unveil his long-discussed plan for cutting the income tax rate by 10 percent over three years.

Annapolis : State House Pipkin letter chides O'Malley on travel State Sen. E.J. Pipkin, an Eastern Shore Republican, sent a letter to Gov. Martin O'Malley last week, questioning his trip to Ireland in the midst of the state's budget crisis and suggesting he check out that country's tax structure. O'Malley, who has called a special session of the General Assembly for Oct. 29, went on a trip paid for by the Dublin Chamber of Commerce. He planned to attend an event at the Royal College of Physicians of Ireland with Dr. Robert C. Gallo, director of the Institute of Human Virology and Division of Basic Science at the University of Maryland Biotechnology Institute.

ANNAPOLIS -- The Maryland Retail Merchants Association became yesterday the latest business group to speak out on a controversial tax package that, among other things, would expand and raise the state sales tax.Not surprisingly, the group found no merit in that aspect of the package, named the Linowes report after its chairman, Montgomery County lawyer R. Robert Linowes. The report, which the Schaefer administration has decided to send to the General Assembly, would raise about $800 million in new taxes to help poorer jurisdictions around the state, as well as raise money for education and transportation.

MARYLAND VOTERS signaled a fiscal restiveness in the Nov. 6 elections. But a close look at the results does not indicate that the state is in the throes of taxpayer revolt.Clearly there is growing concern around the state about taxes -- primarily property taxes. Yet, these concerns were not so overwhelming as to cause the electorate to approve caps on even that major source of local revenue.Indeed, property-tax caps were rejected in Anne Arundel, Howard and Baltimore counties. And in Montgomery County, the least burdensome restriction -- which authorized a removable cap not exceeding the Consumer Price Index and provided no cap at all on new growth -- was approved.