THE LINOWES Commission report has detonated like a small nuclear device in Maryland politics. Conceived and organized three years ago by Gov. William Donald Schaefer, the group charged with coming up with a restructuring plan that would make the state's tax system fairer began its labors in one kind of economic season and completed them in another. Roughly, the change in weather has been from good times to bad -- or at least to the mounting threat of bad times. This turnabout may not change some basic assumptions that lay behind the effort -- namely, that Maryland's income tax structure was becoming increasingly regressive and that the state was not supporting education in an equitable way. But it has surely changed assumptions about how these circumstances can and should be dealt with.
Add to this drastically changed fiscal situation the fact that people in some parts of the state (Montgomery County is Exhibit A) stand to pay more and receive proportionately less under the recommended redistribution, toss in an abundance of inaccurate scare reports of what the commission has recommended and you have the recipe for the bomb. The opposition to the report is articulately voiced in a piece by State Sen. Howard A. Denis on the op-ed page today.
It strikes us that it is not necessary to deny one half of this awkward proposition in order to credit the other. You do not have to ignore the changed economic circumstances and the inadvisability of taking some of these steps at the moment to acknowledge that the original core problem exists, or vice versa. We think the first thing to do is to carefully -- and critically -- consider the Linowes Commission report itself, section by section, not as an immediate take-it-or-leave-it legislative measure but as a package of serious, long-term recommendations for more revenues to be raised in a more equitable way. It has been widely presumed for years that Maryland needs substantial increases in revenues to keep its commitments to education and to basic services that used to be federal responsibilities. The commission, made up of representatives of business, labor and universities, as well as former U.S. senator Charles McC. Mathias Jr. -- made the following findings concerning the state's tax bases:
The total impact of all state and local taxes "is to burden lower- and middle-income taxpayers more than those with higher incomes."
Despite relative prosperity, Maryland "is not supporting educational excellence in the state as a whole" but has counties in which state aid does not take into account inadequate local money for education.
Local property taxes are under intense citizen attack, and in Baltimore City may be "stifling its economy."
The state is not doing enough to improve transportation.
The tax system fails to recognize certain changes in the economy and thus penalizes some individuals and businesses.
This is what the members recommend:
1) Make the state income tax rates more progressive, with a top combined marginal rate of 8.75 percent (6.25 percent on income above $17,000 and a 2.5 percent local rate). This would lower the state income taxes of two out of three Marylanders.
2) Broaden the base of the sales tax to two dozen services now not included, including cigarettes. Raise the sales tax rate from 5 percent to 5.5 percent.
3) Simplify property tax systems, provide relief to hardship cases and reductions by returning equivalents of all state real property taxes to local jurisdictions.
4) Apply an annual 2 percent personal property tax to the value of motor vehicles and boats, with half of the motor vehicle revenues returned to local governments and the rest going to the Transportation Trust Fund. The revenue from the tax on boats would go for cleanup of the Chesapeake Bay.
5) Increase the corporate income tax and financial institution franchise tax from 7 percent to 7.5 percent.
Would adoption of all this all at once, to be effective immediately, sock it really hard to the better-off Marylanders of this region? Yes. Is this a good time, considering the way the economy is going, to load on every change proposed? No -- and Gov. Schaefer and the legislature aren't at all likely to swallow the package whole. The numbers in it aren't sacred, the fairness of it all isn't evident and the timing couldn't be much worse. But the work of the Linowes Commission is extraordinary in its scope and right in its hope to restructure the state tax system for the first time in two decades. The report should be accepted as a valuable working document and starting point for legislators willing to tackle this important issue seriously.