One way or another, you'll pay more to Md.

The long arm of state government is about to reach into your wallet, as lawmakers and Gov. Robert L. Ehrlich Jr. debate whether to add a few cents to your restaurant bills, grab a bigger slice of your weekly paycheck or boost payments for car registrations.

Those options and more are before the General Assembly as it looks at how to balance the state's $23 billion budget for next year - and how to raise more money for education in the future - without inflaming voters.

One way or another, it appears likely that most Marylanders will be paying more by this time next year. But how and how much will be the subject of heated debate in the coming weeks, with the governor seeking a list of fee increases and legislative leaders pushing for various tax plans.

The great taxes vs. fees discussion got under way in earnest this week, when Democrats in the House of Delegates offered their best arguments for a 1 cent increase in the state's 5 cents-a-dollar sales tax, an idea backed by House Speaker Michael E. Busch and other leaders despite the governor's opposition.

It will continue today, when a House committee rakes together the widely scattered fee increases Ehrlich has proposed and debates whether a tax increase is preferable.

"It's our obligation to look at all revenue sources, regardless of what the governor says," said Busch.

The penny sales-tax increase would generate about $550 million a year, analysts say, less than half the $1.3 billion yearly cost of a landmark education program whose mandates have created projections of revenue shortfalls for years to come. A family earning $66,400 would pay an estimated $146 more yearly on items such as clothing and bar tabs.

House leaders are also considering:

  • Expanding the roster of items to which the sales tax is applied to include cellular telephone calls; golf course membership fees; tanning salons and other so-called "luxury services."

  • Adding a temporary additional income tax surcharge for individuals who earn more than $200,000 a year and families who earn more than $250,000 a year. They would pay an extra $125 for every $10,000 in taxable income above the limit they earn.

  • Closing the loopholes perfected by accountants for use by corporate clients to avoid paying state income taxes.

    Ehrlich's plans

    Ehrlich has promised to veto a sales or income tax increase, and promotes slot-machine gambling as the preferable revenue source for education.

    Still, gambling won't produce enough money to cover all the state's needs.

    So Ehrlich has offered dozens of fee increases to fund road construction and supplement the options of a variety of state agencies, such as the Department of Natural Resources.

    Under Ehrlich's suggestion, the cost of renewing a two-year vehicle registration would rise $47 for car owners, and $72 for those who motor around in sport utility vehicles or trucks, with money going for transportation. Boat owners would pay $16 more for a two-year registration, and dozens of other fee increases are in the works.

    The Motor Vehicles Administration also wants to charge motorists $30 to clear their records after cities or counties "flag" registrations for unpaid parking tickets and other citations. The agency says it can raise $18 million yearly with the new system.

    Many ideas are circulating because lawmakers are trying to craft a package of revenues - including slots - that is acceptable to Ehrlich and generates enough money.

    Most of the proposals will wither and die. But by discussing so many options now, lawmakers can gauge the governor's response to their trial balloons and leave bills alive that could become part of a broad compromise that likely won't come until the closing days of the session in April.

    "We have asked [the administration] to tell us which taxes are palatable to them," said Del. Sheila E. Hixson, chairwoman of the House Ways and Means Committee and sponsor of several tax bills. "If it is 'no' to income and sales taxes, there will have to be other taxes in a package," the Montgomery County Democrat said.

    Voter input sought

    Del. Luiz R.S. Simmons, also a Montgomery County Democrat, wants voters to chose whether to raise the sales tax through a referendum to amend the state constitution. If passed by the General Assembly by a 60 percent margin, the referendum option could not be vetoed by the governor.

    Simmons said he introduced his bill as an alternative to the slot-machine gambling plan, and wants the additional revenue placed in a fund that could only be used for education.

    "I feel confident that the public would embrace it," Simmons said. "You can't beat something with nothing."

    The one-cent sales tax increase has the support of the 59,000-member teachers union, which has been distributing lapel pins with the shiny copper coin attached that are becoming a common sight in Annapolis. Busch has taken to wearing one.

    "What makes this year the year to do it? Quite frankly, we're up against a wall," said Robert L. Rankin, a government relations specialist with the Maryland State Teachers Association.

    But opposition is fierce. A trade group representing retailers is opposed and points out that lower wage-earners spend a higher percentage of their income to buy taxable goods such as clothing than the wealthy, making the tax regressive.

    "Our client doesn't have the ability or the sophistication to avoid the sales tax," said Stanley Zerden, owner of Queen's, a women's clothing store at the Old Town Mall just east of downtown Baltimore. "One hundred percent of their income is spent, every month."

    Tom S. Saquella, president of the Maryland Retailers Association, said the shifting nature of the state economy - toward services and away from goods - makes sales tax a declining revenue source.

    "For the same squeeze, you're not getting as much juice," he said. "The sales tax is not a tool to deal with the long-term fiscal problems of the state."

    The income tax surcharge on the wealthy has appeal among some state leaders such as Comptroller William Donald Schaefer because it was used during the state's last fiscal crisis, in the early 1990s.

    Corporate loophole closings seem to be on everyone's agenda, although there is disagreement over just how much money they will raise.

    As Ehrlich continues to fight tax increases, he is promoting dozens of fee increases. Today, the House Ways and Means Committee will discuss departmental bills that call for new or higher fees on everything from teaching certificates and accounting licenses to duck hunting guides and wildlife programs.

    While most of the tax ideas are coming from the House, Senate President Thomas V. Mike Miller said he will consider them in his chamber - but would not predict their success.

    "These are difficult times," Miller said. "I think a tax bill could pass the Senate, but not combined with anything else. And not with enough votes to override a veto."

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