Prince George's County Executive Parris N. Glendening said today he will back off his efforts for a local increase in the state sales tax because of opposition from Gov. Harry Hughes and legislative leaders.
Glendening said that in a meeting here today he asked the governor instead to support two other measures designed to help offset a projected $32 million shortfall in next year's county budget. One would increase the county's add-on or piggyback income tax and the other would boost the tax rate on personal property assessed against some businesses.
More than most other local jurisdictions in the state, Prince George's has been suffering financial difficulties. Not only is the county feeling the effects of a depressed economy, but it must operate under a voter-approved limit on property-tax collections (TRIM) that was set four years ago.
With Hughes and legislators solidly opposed to permitting Prince George's to establish its own sales tax, Glendening has now focused on increasing the county's portion of the state income tax as a way of avoiding county employe layoffs and reductions in services.
Maryland taxes the income of its residents a maximum of 5 percent, and allows the 23 counties and the city of Baltimore to add on a local "piggyback" tax of up to 50 percent of the state's take. Except for Calvert County, all of the state's jurisdictions assess the full 50 percent.
Glendening said he asked Hughes to support legislation that would increase Prince George's piggyback tax rate from 50 percent to 60 percent. According to Glendening, such an increase would raise nearly $23 million and would add $75 to the tax of a family of four with an income of $20,000.
Glendening said that while a piggyback tax increase is likely to provoke controversy at home and in the legislature, Hughes indicated that he was "open" to the idea.
"I think he thought it was a reasonable proposal, that was preferable to the sales tax," Glendening said after the late afternoon meeting at which the new county executive and his legislative liaison, Royal Hart, briefed Hughes on the county's money woes.
Hughes' aides said the governor had "reservations" about the tax increase, since he recently proposed some tax increases to balance the state budget, but was considering the idea.
Hughes made clear his opposition to a local increase in the state sales tax shortly after Glendening began publicly pushing the idea of a 1 percent increase, which would yield some $28 million in additional revenue. Glendening was also warned by his delegation in Annapolis that the idea was decidedly unpopular.
Glendening also said he will abandon ideas to levy a county telephone tax or a cable television tax because he believes neither measure would raise enough money.
But in addition to the $23 million that a higher piggyback tax would raise, Glendening said Hughes also reacted "favorably" to a plan to increase the county's personal property tax rate.
Under state law, tax rates on real property (which includes an individual's home and land) and personal property (which includes the assets of large businesses, such as equipment, stocks and bonds) must be the same.
But since the $143 million limit on property-tax collections was imposed in 1979, the tax rate in Prince George's has dropped from $3.57 per $100 of assessed value to $2.63, providing a windfall of sorts for businesses, which have had their tax rates reduced by the TRIM initiative designed to help homeowners.
Glendening wants the law changed to uncouple the two rates, allowing the county to charge the higher 1979 rate on personal property for two years. That change, Glendening said, would bring in an additional $10 million.