Legislative leaders unveiled today a comprehensive proposal designed to mute substantial opposition, a proposed increase in the state sales tax from 4 to 5 per cent by providing a rebate of up to $10 to each Maryland resident who pays the state income tax.
The proposal, announced by State Senate President Steny H. Hoyer and House of Delegates Speaker John Hanson Briscoe, touches the income, sales and property taxes - the three major sources of government income in Maryland - but is contingent on enactment of the sales tax increase that many legislatorsvigorously oppose.
"All of us came to the General Assembly this session promising some tax relief for the people of Maryland," Briscoe said. " . . . In this package of bills, there are many items we believe are significant."
The main element in the package is the $10 rebate to income taxpayers. The money for the rebates, which would go to an generated by cuts in the $3.9 billion budget submitted by Gov. Marvin Mandel.
Mandel's budget proposal has become the hottest issue in this year's General Assembly session. It has been decried as bloated by many legislators, but a three-day effort by the Senate to cut the budget produced only about $6.5 million in cuts, the vast majority of them the kind of gimmicks legislators have criticised Mandel for in the past.
In the House, the cutting effort was more successful, yielding a saving of about $40 million. "It is clear that we're going to compromise," on the final amount of the cut, said Hoyer. "In the neighborhood of $22 million is a realistic amount" for the compromise, said Briscoe.
For the announced $10 rebate to be possible, the House and Senate will have to agree on precisely $22 million of budget cutting. The chances of the rebate being larger are negligible, Hoyer and Briscoe said: the chances of it being smaller are more substantial.
"To the extent that funds are a vailable, we went to see those funds used for taxpayer relief," said Hoyer. "The taxpayers will recognize it is a significant attempt, and better than getting no money back."
Early reaction to the proposal indicated it may not achieve its desired effect of lessening the opposition to the increase in the sales tax, now set at 4 per cent.
"That's not any compromise," said Sen. John C. Coolahan (D-Baltimore County), a leader of the move against increasing the sales tax. "They're going to charge people $120 million (the amount the sale tax increase would raise) for a $10 rebate.
"That's buying a pig in a poke as far as I'm concerned . . . The real purpose is to swing a lot of votes that may be shaky."
"It inclines me to vote against the sales tax," said Sen. Jerome Connell (D-Anne Arundel), a supporter of the sales tax increase until today. "Up until now, I thought they were going to come up with a much better proposal."
"It's one of these games," said Sen. Arthur H. Helton (D-Harford), shifting dollar bills from one of his pants pockets to another. "They used to play it with three shells and a pea."
Legislative budget analyst William Ratchford said the average Maryland resident, earning $12,000 to $14,000 annually, would pay an additional $25 to $30 if the sales tax increase goes through.
For persons with lower incomes, said Hoyer, the $10 rebate "will probably wipe out the increase in the sales tax to them."
The legislative leaders' program also includes relief for hard-pressed property tax payers, whose problems are uniformly described as the most serious issue the legislature faces this year.
The proposal would extend the benefits of the "circuit breaker," a controversial program that ties property tax bills to income level as well as the value of a home, to all Maryland homeowners.
The program now applies only to persons over 60, providing benefits to 84,000 homeowners at a cost to the state of $18 million. Extension of the program would aid an additional 136,000 homeowners, said Hoyer and Briscoe, at a cost of $17 million.
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The "circuit breaker" program has already come under heavy fier notably from Mandel - because it has operated to provide greater relief of persons living in affluent areas like Montgomery County than to residents of poorer areas whose properly assessments are relatively low.
The proposal would also substitute biennial reassessments for the yearly reassessments that now raise property tax bills each year. The property tax proposals would not take effect until the year after next, hence would provide no immediate relief.
One element of the property tax program that could take effect this year is a provision to allow county governments to set their own inflation allowances on assessments. Now, all taxpayers enjoy a 50 per cent inflation allowance - the owner of a $40,000 home pays taxes on only $20,000. Under the proposal, local governments could set the inflation allowance at any figure over 50 per cent.
The final element of the tax reform package would modify the state income tax permitting deductions for child-care expenses and by increasing the standard deduction. The increased deductions would be offset by elmination of the combined separate filing status, which is used by many working married couples.