Tax Structure

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 state's fledgling biotechnology companies need additional tax breaks if they are to flourish, two players in the state's biotechnology game said at a congressional hearing in Baltimore yesterday.Crop Genetics International has raised nearly $65 million but is still four to five years away from bringing any significant product to the market, said Dr. James H. Davis, vice president of research and development for the Hanover-based company.Like most other businesses that need to raise capital, his company would like to see tax breaks reinstated for long-term capital gains to help shake loose more money from venture capitalists.

The man who would make Maryland taxes fairer -- and, yes, raise them -- found himself on the edge of the economic and social precipice last week.He was driving onto the College Park campus of the University of Maryland to deliver a lecture. He saw students demonstrating and teachers declaiming. He heard them denouncing the budget cuts -- $40 million in two years at an institution that had been earmarked for massive budget increases.R. Robert Linowes, chairman of a commission that studied Maryland's tax structure and recommended a massive overhaul, found himself in agreement with the demonstrators.

The call for revamping Maryland's tax structure couldn't have been more universal at last night's Baltimore school board meeting if Gov. William Donald Schaefer had orchestrated it himself.Board members complained of $8.8 million in proposed cuts to the city's already overburdened education budget -- which were geared to minimize the effect on the classroom -- and urged parents and teachers gathered for the meeting at Coldstream Park Elementary School to lobby their legislators for a change in the state tax structure.

LAST MONDAY night, a thousand Baltimoreans crowded downtown Baltimore's War Memorial building to protest the multimillion-dollar budget cuts announced by Governor Schaefer. Witness after witness testified that programs being cut are those that rescue people from death, illness and despair. Their protest has been followed by daily and nightly demonstrations in Annapolis.But these state-level cuts are only the latest insults to a city that has undergone more than a decade of cuts in financial aid from the federal government.

The current laments in Maryland government about the state's revenue shortfall and the need for higher taxes is, taken by itself, one of the more hypocritical arguments to waft through these ears in a long time.The notion that higher taxes are needed to avoid layoffs makes no sense during a recession, when the state's private economy faces the same dilemma. Why not have the state government give money back to the private sector so the private sector can avoid layoffs?The argument that state revenues must be increased to save essential public services is the best-sounding defense of higher taxes.

After declaring a Schaefer administration tax package "dead on arrival" earlier this year, General Assembly leaders now are resuscitating the notion of tax reform. If deliberations proceed on schedule, there could be broad consensus on a tax package to present to the 1992 legislative session.What a change in attitude! The cries of "no more taxes" from legislators have died down, perhaps because of the pounding Maryland's treasury has taken from the recession. House Speaker R. Clayton Mitchell and Senate President Thomas V. Mike Miller have spent much of the last six months scrambling to balance the state budget, which has been thrown into chaos by the continuing plunge in revenues.

Maryland's much-maligned tax structure -- criticized for unfairly burdening the poor -- actually does a better job than most states in sparing the poor. It does so, however, by hitting the middle class harder than the rich, according to a new study.And, while the state's tax structure has grown more "progressive" over the last six years, the plight of the middle class at tax time has worsened.The study, released yesterday by the Washington-based Citizens for Tax Justice, looked at the relationship between taxes and income in 50 states and District of Columbia.

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 -- Lt. Gov. Melvin A. Steinberg split with his boss, Gov. William Donald Schaefer, yesterday over what course the administration should recommend for its controversial Linowes commission tax restructuring proposal.Mr. Schaefer wants the bill passed this year. Mr. Steinberg said ++ he was convinced the measure needed to be studied by the General Assembly and subjected to public hearings this summer.As a result, Mr. Steinberg, who is in charge of the governor's legislative agenda, said he had decided not to testify at a joint legislative hearing today on the tax proposal legislation.