An increase in the Maryland sales tax from 4 per cent to 5 per cent, coupled with possible property tax relief for home owners, passed a major hurdle today by winning approval of the Senate Budget and Taxation Committee.
"We've got the votes to pass them" in the full General Assembly, predicted the committee chairman, Sen. Roy N. Staten (D-Baltimore County), increasing the sales tax and taxes on auto and bozt sales, will produce an extra $143 million.
Together with an accounting gimmick involving revenue from the popular state lottery, the package would permit full funding of Gov. Marvin Mandel's proposed $3.9 billion budget, Staten said.
The 5 per cent rate would go into effect June 1. meaning higher taxes are likely to precede any property tax [WORD ILLEGIBLE] . The new rate would place Maryland higher than Virginia, where the rate is 4 per cent. The District rate varies according to the item purchased.
Today's action was seen as a blow to legislators who had hoped to find enough fat in Mandel's budget to offset the need for the tax increase proposed by Mandel.
Sen. Charles H. Smelser (D-Carroll), who voted against the higher sales tax, unsuccessfully sought to have the action delayed until after the committee acts on various proposals to revise the state income tax structure.
Staten agreed to delay taking the approved tax package to the Senate floor until Tuesday so Smelser and other supporters of changing the income tax formula could get a hearing Monday.
But the chairman, who is also Senate majority leader, left little doubt that the sales tax increase would be enacted. Staten added that proposals to greatly reduce the governor's budget, which would require an extra $175 million for full funding, were unrealistic.
Any property tax relief would be decided by local governments, under provisions of an amendment approved by the committee today.
The plan, which would be considered by the full Senate, would permit county governments and Baltimore city to establish a higher inflation allowance for owner-occupied, single-family residences than for other classifications of property.
The state now sets the inflation allowance at 50 per cent for all property. For example, a house and a store that each has a fair market value of $100,000 are now both assessed at $50,000. Under the new plan, the store would still be assessed at $50,000, but depending upon the inflation rate, the house could be assessed at $40,000 if the rate were 60 per cent, at $30,000 at 70 per cent, or whatever.
The option would not give local governments any extra state money, but it would permit them to decide where the revenue will come from among county property owners.
Sen. Edward J. Mason, Jr., (R., Western Md.) said he was concerned that local governments would shift the burden to businesses and "drive them out of the state."
The proposal is similar to a "tier tax" most recently pushed by Prince George's County Executive Winfield M. Kelly. Kelly's plan would have allowed the setting of different property tax rates for various classifications of property so as to shift the brunt away from owners of single family homes.
Supporters believe the measure would offset complaints from home-owners that business and commercial properties get favorable treatment in the assessment process.
Approval of this measure means that the legislature has - at least for the time being - discarded a major assessment bill proposed by Mandel.
The committee also approved an accounting change that will permit the state to spend lottery proceeds every month instead of waiting until a full year's receipts are in. Staten said this would give the state about $60 million "to play around with" in the fiscal 1978 budget.