Maryland Gov. Harry Hughes is considering increasing taxes on cigarettes, beer, wine and liquor and starting another lottery game to help come up with $133 million needed to balance next year's budget, according to State House sources.
Hughes is also reported to be leaning toward raising the state property tax, now at 21 cents per $100 of assessed value, at least to the 23-cent level it was at when he became governor in 1979. Each penny on the property tax costs the owner of a $100,000 home an additional $4.50 a year, and produces $5 million for the state.
Sources said Hughes is leaning to a second daily numbers game, citing studies that show lottery players will increase spending if given a choice of games. The new game, to be called "Pick 4," would be similar to the current Maryland Numbers Game except that bettors would pick four numbers instead of three. It would raise about $30 million a year.
Hughes apparently rejected an instant lottery, such as played in the District of Columbia, believing that it would draw mostly poor people, while the proposed new game would appeal to a variety of income levels.
Hughes has declined to discuss any of these proposals and at a press conference today said only that "the main thing is to make sure that everyone is prudent and cautious about the future. If the economy stays as it is, and if we don't have a recovery anytime in the near future, our problem and the problems of all other states are going to continue to get worse . . . . "
Hughes said it was "highly unlikely" that he would seek to increase the sales or income taxes, although as recently as Tuesday at a staff meeting, the governor was considering increasing the income tax rate. He apparently changed his mind after aides reminded him of a reelection campaign promise to avoid raising general fund taxes, which include the income tax, this year.
Like other states, Maryland is confronted with a difficult economic picture caused by the national recession. Three weeks ago, the state Board of Revenue Estimates informed Hughes that sales tax revenues are coming in well below estimates and predicted that the state would end the current fiscal year (1983) with a deficit of $6 million and face a shortfall of $133 million in fiscal 1984, which begins July 1.
As a result of those forecasts, Hughes has been surveying a variety of revenue-raising and cost-reduction measures, some of which are expected to face problems in the legislature, which convenes Wednesday.
"There is a serious fiscal problem that will require him to take some radical steps," said House Speaker Benjamin L. Cardin, who along with Senate President-elect Melvin A. Steinberg was briefed by Hughes this week. "Some could be very, very controversial. Increasing any tax is controversial."
Hughes is to submit his fiscal 1984 budget to the General Assembly a week after it convenes. At that same time, he will explain how he proposes to fund the budget. The legislature must approve increases in "luxury" taxes but Hughes can set the property tax rate himself, with the approval of the comptroller and treasurer, his colleagues on the Board of Public Works.
For the last two months, budget analysts for the governor have been trying to come up with politically acceptable ways to raise money and cut sections of the budget. Among the cuts considered were reducing aid to local subdivisions, but it was unclear whether Hughes would do that. By this week, 10 or so options were being discussed, with the lottery and increases in state property and "luxury" taxes emerging as the most acceptable.
Maryland, which is a tobacco-producing state, taxes cigarettes at 13 cents a package, about average among the 50 states, according to Marvin Bond of the comptroller's staff. The cigarette tax in Virginia is 12.5 cents, and 13 cents in D.C. In New York state, it is 22 cents a pack.
A 2-cent-a-pack increase, which is in the range being considered, would bring in about $15 million annually. Maryland raised its cigarette tax from 10 cents in 1979.
Bond said that distilled spirits are taxed by the state at $1.50 a gallon, beer at 9 cents a gallon and wine at 40 cents a gallon. Comparisons with other states are hard to draw, Bond said, because many states have state-controlled liquor sales. According to Bond, Maryland last raised the tax on beer and wine in 1977 and distilled spirits well before that.
Hughes also could transfer to the general fund up to $60 million from the Transportation Trust Fund, but he is unlikely to take that much because it would seriously disrupt road building and repair throughout the state.