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Md. House Democrats Propose Tax Cut

Plan Would Reverse Rise in Property Rate

By John Wagner
Washington Post Staff Writer
Thursday, February 3, 2005; Page B01

Democratic leaders in the Maryland House of Delegates yesterday proposed rolling back an increase in the state property tax enacted during Gov. Robert L. Ehrlich Jr.'s first year in office.

Under the House Democrats' proposal, homeowners' tax rate would drop from 13.2 cents per $100 in assessed value to 8.4 cents, where it stood before the Republican governor's election in 2002. The rollback would save the owner of a $200,000 home nearly $100.

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The move appeared designed both to ease a pinch on homeowners, thousands of whom have seen spikes in their assessed property values in recent weeks, and to outflank a governor who frequently touts his anti-tax credentials. Ehrlich proposed the property tax increase in 2003 as part of a series of measures to close a gaping budget hole.

"The time is right for this," House Speaker Michael E. Busch (D-Anne Arundel) said yesterday at a morning news conference, during which he also pledged to increase state spending on school construction. "We just think it's an opportune time to repeal the tax increase that Governor Ehrlich initiated in his first year in office."

Ehrlich later told reporters that his administration has been talking about "moving in the right direction" on the state property tax rate in coming months. He also questioned the commitment to the issue by House Democrats, who last year passed a $1 billion tax package that included property tax relief but raised sales and income taxes.

"Geez, suddenly we care about the taxpayers," Ehrlich said mockingly.

Senate President Thomas V. Mike Miller Jr. (D-Calvert), meanwhile, argued that cutting property taxes this year would not be responsible, given the state's unmet needs in areas such as education, health care and the environment. Rolling back the property tax rate would cost the state more than $165 million in annual revenue.

"Now is not the time for a tax cut," Miller said in an interview. "It might appear to be good politics, but it's not good money management. . . . I think we'd be ill-advised to move in this direction."

The proposed state property tax reduction was one of several budget initiatives put forward by House Democrats yesterday during their news conference. Busch also said his chamber would aim to devote $250 million to school construction next year, about $93 million more than Ehrlich proposed in his budget.

The Democrats also touted their support for a bill that would close a tax loophole that allows companies to avoid paying transfer and recordation taxes when they purchase property. The bill would temporarily steer new revenue to school construction as well.

Ehrlich and Miller, who have both pushed for the legalization of slot machine gambling, have pledged to earmark a portion of gambling proceeds to build and renovate more schools.

Busch, whose proposal seeks to undercut that approach, said the state could afford both the property tax cut and the increase in school construction without a new source of revenue.

Busch pointed to several sources of money, including the state's "rainy day" fund, a reserve account that Ehrlich has proposed keeping at a level $230 million higher next year than required by law.

Lawmakers also plan to cut about $145 million from the budget that Ehrlich proposed to meet a "spending affordability" target. The target, which was set yesterday, is designed to keep growth in state spending in line with growth in the state's economy.

Busch said that many of those cuts would be difficult but that state taxpayers should be the beneficiaries.

"We might as well give that money back to the citizens of the state," he said.

Busch said that crafting the budget should be made somewhat easier by a strong Maryland economy, which probably will lead state fiscal analysts to increase tax revenue estimates for next year.

Miller said the more prudent course would be to wait until after the 2006 elections before cutting taxes. By that time, he said, it will be clear whether the uptick in the economy can be sustained.

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