Proposals Mix Tax Increases, Tax Cuts
Washington Post Staff Writers
Sunday, January 10, 1999; Page B01
Maryland's treasury is overflowing to the tune of $250 million, and there are plenty of proposals for spending the surplus: new schools and parks, drug treatment programs, more teachers and a quicker cut in the income tax.
But when the state's legislators convene this week, the hot debate will be over increasing taxes.
The suggestion that taxes should be increased when the coffers are plump with excess revenue may be a hard sell to the public for Gov. Parris N. Glendening (D), legislative leaders and advocates who argue that without a gasoline tax increase, the state will run low on money for road construction and mass transit improvements.
"Major interstate corridors in urban and suburban Maryland need to be rebuilt or expanded," said House Speaker Casper R. Taylor Jr. (D-Allegany), noting that the need for road improvement is just as great in rural Maryland. "The need is there."
A second proposed tax increase would bump the levy on cigarettes by $1 per pack in an effort to discourage teenage smoking.
The tax increase proposals are sure to dominate debate during much of the 90-day session of the Maryland General Assembly that opens on Wednesday. Lawmakers also will spar over the emotionally charged issue of the late-term procedure opponents call partial-birth abortion, consider ethics law recommendations to restrict the wining and dining of legislators by lobbyists, determine how to divide as much as $250 million in new school construction money, debate legal protections for gays and grapple with utility regulation changes that would affect the monthly electric bills of every Maryland resident.
But for all the controversy some of those issues will invite, the tax increase proposals seem likely to engender the hottest debate. Even those who support the increases realize they have a difficult case to make to the voters.
"It's going to be tough. I think clearly that [the budget surplus] severely impacts the cigarette tax proposal," Taylor said.
Taylor held out hope that support would be found for a gas tax increase of as much as 10 cents per gallon to build roads, given Marylanders' frustrations with steadily increasing traffic volume. He also suggested an alternative: raising the sales tax from 5 to 6 percent, with the new revenue earmarked for mass transit. That, in turn, would free other transportation money for road construction.
,2 Republicans, badly outnumbered in both chambers, argue strenuously against any tax increases in these economic good times. Senate Minority Leader Martin G. Madden (R-Howard) said lawmakers should speed up an already approved income tax cut now scheduled to be phased in over several years before asking Marylanders to reach deeper into their pockets.
"There are plenty of dollars to take care of existing promises," said Madden, a moderate Republican who has worked well with Democrats. "If we're going to raise a particular tax . . . we should be prepared to look at reductions in other areas."
Senate President Thomas V. Mike Miller Jr. (D-Prince George's) said the effort to raise the gas tax will not be successful unless Glendening takes the lead. The governor said last week that he was ready to do just that. "There will have to be increased revenues" for mass transit and road building, Glendening said.
As the session opens, simmering tensions are evident within Glendening's party, which has a 32-to-15-seat majority in the Senate and a 106-to-35-seat majority in the House.
The governor already has signaled that Baltimore Mayor Kurt L. Schmoke and Prince George's County Executive Wayne K. Curry Democrats who abandoned him during the primary election campaign are on the outs. And friction appears to be brewing between the governor and Montgomery County Executive Douglas M. Duncan (D), a staunch supporter of Glendening's reelection who has expressed disappointment with some recent Glendening decisions.
But with money to spend and a big victory behind him, Glendening is undeterred.
"This is going to be a great four years," Glendening said last week.
Some issues facing the legislature:
Income Tax Cut
Two years ago, the legislature approved a phased-in 10 percent income tax cut. Of that amount, 5 percent is in place, and lawmakers gave themselves three more years to implement the rest.
During last fall's gubernatorial campaign, Glendening called for accelerating the schedule for the rest of the tax cut this session. He since has backed away from that and has placed greater emphasis on meeting needs in education and elsewhere. Democratic legislative leaders contend that next year and the year after are a better time for implementing the rest of the cut.
Republicans are pushing to do it faster. Madden said GOP senators want 2.5 percent of the cut given this year and the remaining 2.5 percent next year, citing the large surplus in the state treasury.
Glendening plans to introduce legislation banning discrimination against gay men and women, an idea that repeatedly has failed to win the support of legislators. The measure would give gays the same protections from discrimination in housing or work that is given to women, ethnic minorities and religious groups.
The governor supported a similar measure that was killed in committee three years ago. Glendening said he was inspired by the story of his brother, who was gay, died of AIDS and was afraid during his 19 years in the Air Force to disclose his sexual preference.
"I am going to use the resources of the office to try to get the bill through," Glendening said. "No one should be in fear of their job . . . because of their sexual orientation."
Two top Republican senators who supported abortion rights lost last fall's GOP primary to antiabortion candidates who went on to win Senate seats. That has set the stage for a pitched battle over whether to ban partial-birth abortions. Miller said it could be the most emotional issue lawmakers face this year.
The little-used procedure is for women late in their pregnancies. It appears likely that a ban, which never got out of a Senate committee last year, will pass the full Senate this time. Its fate in the House is less certain. Glendening has vowed to veto any legislation unless it allows exceptions to protect a mother's health.
"We think it is an attempt to ban most abortion procedures," said Traci Siegel, executive director of the National Abortion and Reproductive Rights Action League of Maryland. "Our pro-choice majority was eroded, and we're prepared to see legislation on many fronts."
Abortion opponents insist they just want a partial-birth ban for now, though they also may try to limit Medicaid funding for abortions if given an opportunity.
Noting that voters in 1992 affirmed abortion rights in a statewide referendum, newly elected Sen. Andrew P. Harris (R-Baltimore County) said, "We couldn't change the fact that women in Maryland have a right to choose if we wanted to."
The legislature is set to consider a new ethics law. Among its most important provisions is a ban on lobbyists wining and dining individual legislators.
The proposal is the work of a special commission formed after last year's session, during which a senator was expelled and a delegate resigned for ethical transgressions.
The legislation would allow lobbyists to continue to entertain lawmakers at small receptions if the lawmakers were invited in groups, such as by committee. Otherwise, all entertaining over dinner and drinks would be eliminated. Free tickets to sporting and cultural events also would be eliminated. Only organizations that sponsored an event for example, the Baltimore Orioles and owner Peter Angelos would be able to give away tickets.
Critics say such perks give lobbyists and those with money special access to lawmakers. Legislators have become increasingly uncomfortable with the public perception of those perks and privileges.
Taylor and Miller said they expect the General Assembly to approve the commission's recommendations early in the session with virtually no changes.
Glendening has pledged to devote $1 billion to public school construction over the next four years, and county leaders are lining up for their share of the first $250 million installment. Glendening provided money to help build or renovate 6,000 classrooms statewide during his first term, and critics charge that he used the bulk of the money as a payoff to jurisdictions that supported him.
Republicans are advocating a plan they say would take the politics out of the decision-making and provide funds based on need.
Glendening has postponed plans to hire additional teachers to reduce class size, delaying delivery on a promise he made during his reelection campaign. The governor said he will seek to establish guidelines this year to reduce class size for first- and second-grade classes and in science and mathematics classes in middle school. Funding, he said, will come later.
Glendening and legislative leaders want to pump more money into after-school programs, and Glendening said he will focus more closely on higher education in his second term.
Maryland's Public Service Commission has set a tentative schedule to begin a three-year phase-in of deregulation in July 2000. To adhere to that schedule, legislators must pass a bill laying the groundwork this session. There is little consensus on the issue.
Advocates say deregulation will lead to reduced costs and greater efficiency for large commercial consumers hospitals and universities, for example that can shop around among local and out-of-state energy companies for the best prices. But state officials worry that small businesses and individual customers may end up paying more.
Local electric suppliers such as Baltimore Gas and Electric are vying for property tax breaks and other incentives that would help them compete with out-of-state companies that are clamoring to serve Maryland businesses and residents. County leaders are worried that those tax breaks would rob them of millions of dollars in revenue.
And without changes to current tax law, the state could lose up to $140 million in taxes it collects annually from utilities. The current system was set up to tax only companies that operate under a monopoly. Unless a system is devised to tax the gross receipts of out-of-state companies that come in to take a share of the market, the state would lose revenue.
Some out-of-state companies want Maryland to move fast. But Sen. Barbara A. Hoffmann (D-Baltimore), who chairs the Senate Budget and Taxation Committee, urged caution. "If you make a mistake, the consequences are enormous, and it's difficult," she said.
Glenn F. Ivey, chairman of the Maryland Public Service Commission, said utilities and county and state leaders are working to resolve the issues.
"We want to make sure that five years down the road, everyone is better off than they were," he said. "That's the goal of electric restructuring."
State employees are hoping to win expanded collective bargaining rights, a Glendening-backed initiative widely seen as payback to unions that supported his reelection bid.
The proposal seeks to codify an executive order Glendening signed two years ago against the wishes of many legislators. Labor leaders are pushing to have thousands of contract jobs converted to full-time government jobs, a move that may meet some opposition from conservatives who favor smaller government.
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