Redistributing the wealth?

THE BALTIMORE SUN

Several weeks before the November election, House of Delegates candidate John Morgan read in the newspapers that R. Robert Linowes had previewed his commission's new tax proposals during a meeting of the Maryland Chamber of Commerce.

Mr. Linowes appeared on a panel entitled "Redistributing the Wealth."

Chamber planners may have been indulging in a bit of sarcasm here. But Mr. Linowes, the chairman of a tax study commission, had no concern that the label would be inflammatory. Even in the waning days of what he called "the Reagan bull - - - -," he assumed that the idea of a redistributive tax system was a well-settled principle of life in the United States.

Not according to Mr. Morgan, a Howard County Republican who won a seat in the House of Delegates.

"It struck me as absurd," he said. "I thought we had abandoned all of that. Welfare isn't working. People don't think redistributing the wealth is a good idea."

Mr. Linowes thinks redistribution is a very good idea. His commission has recommended new and increased taxes sufficient to bring in a cool $800 million a year. Property taxes would be cut across the state by more than $200million as well.

The Linowes commission called for boosting the sales tax by a half-percent to 5 1/2 percent -- and sending all the money to school districts. "Money is not the answer by itself," Mr. Linowes said, "but without money there are no answers."

The commission also proposed adding an annual tax of 2 percent on the value of personal property, particularly automobiles and boats.

And the commission wanted the income tax adjusted so that higher-income Marylanders picked up much of the burden from the working poor and the middle class. The income tax would be adjusted upward by as much as 15 percent for adjusted gross income of more than $200,000 and gradually reduced for adjusted gross incomes under $40,000.

Tax systems are inherently redistributive, of course. The society pools resources to build a school, dig a well or send men to the moon. It provides for widows and orphans. It cares for the catastrophic incursions of illness. All of this it does as a matter of course -- influenced by its collective humanity and sense of fairness.

Nevertheless, the idea that money would be collected from the relatively well-to-do and given to the poor has always been regarded in some quarters as subversive -- socialistic or even communistic. In 1894, when Congress passed the first peacetime income tax in the United States, newspaper editorial writers glimpsed the end of the Republic. The Washington Post at first called it "an abhorrent and calamitous monstrousity" that "represents a repudiation of the spirit as well as the letter of Democracy. It punishes everyone who rises above the level of mediocrity."

The New York Times was initially hostile as well. "When men get in the habit of helping themselves to the property of others they are not easily cured of it," the newspaper said.

According to a survey of editorial opinion by Marvin Olasky, a professor of journalism at the University of Texas at Austin, other newspapers supported the new tax as a way to retire the nation's alarming 1894 deficit of $89 million.

The Post eventually changed its editorial mind. The new levy took on almost biblical powers and was called "a rock of credit from which abundant streams of revenue will flow whenever Congress chooses to smite it." After a few false starts, the income tax was approved finally in 1913 when Wyoming became the 36th state to ratify the 16th Amendment, which allowed Congress to tax incomes "from whatever sources derived."

In the name of various economic and social policies, Congress has been smiting the rock ever since. Now the Linowes commission would take its licks -- if the legislature were not standing in the way.

Like the Linowes commission in Maryland today, federal legislators who supported the new tax said their mission -- apart and aside from raising revenue -- was fairness. "The problem," according to Thomas V. DiBacco, an American University historian and tax expert, "was blending equity with the congressional disposition to give and take when crafting legislation."

At some point, "fairness" was equated with the concept of a graduated or progressive income tax -- the idea that money should be extracted more liberally from those who had more of it. That concept lacked universal endorsement, but it became a part of the tax landscape -- or had been until what Mr. Linowes calls "the Reagan bull - - - -." He is referring to the lowering of tax rates from the 70 percent range to 28 percent (recently pushed up to 31 percent).

But John Morgan says Mr. Linowes' idea of bull is out of step with the voters. A 26-year-old semiconductor engineer at the Johns Hopkins Applied Physics Lab, Mr. Morgan ran against the idea that Mr. Linowes and his fellow commissioners were about to reach deeper into the pockets of some Marylanders.

In all, the House of Delegates will have 35 new members -- many of whom, no doubt, would look at tax "restructuring" proposals with skepticism, if not fear and hostility.

"I ran against Linowes to a large degree," said Howard County's Mr. Morgan. "A whole page in my campaign brochure was devoted to Linowes."

"It's dead on arrival," said Mr. Morgan, taking his negative reaction only a half-step further than his more restrained political elders.

"They want a loaded limousine," said Sen. Leo E. Green, D-Prince George's. "The people are looking for a stripped-down Chevy."

"This legislature is coming in here after six months of campaigning, of having its brains beaten in over taxes," said Delegate Charles J. Ryan, the Appropriations Committee chairman who represents the Bowie area of Prince George's County.

Many of these same legislators look north to New Jersey, where anger over tax increases by Gov. James J. Florio very nearly knocked off Sen. Bill Bradley.

"They handled it poorly there," Mr. Linowes insisted. "Florio ran on a no-tax platform and then passed a $1.9billion program. There was no study. I heard a tape of Florio's presentation on taxes. It was ludicrous." Mr. Linowes calculates that the quality and thoughtfulness of his work will, in time, win converts and passage.

Still, Mr. Linowes argues, Mr. Morgan and his fellow bTC revolutionaries misread their new constituents. Voters were not saying no tax increases, he contends. They want fairness. They want accountability. They want a system that can raise all boats -- a system as beneficial to children living in Baltimore as it is to those in -- the comparison cannot be avoided -- Montgomery County.

At this point in any discussion of Maryland taxes, the redistributive dynamic becomes difficult to avoid -- and the struggle to make the system of taxing and spending equitable has frequently been manifested as a struggle between these two jurisdictions.

Notwithstanding the concerns of new legislators, Mr. Linowes finds the caricature of Montgomery County as a parsimonious rich uncle inaccurate.

"People are not as provincial and myopic as they have been painted. I really believe that, as a group, Marylanders have a concern for their fellow Marylanders. They feel responsibilities to people in other jurisdictions who are less fortunate," he said.

Mr. Linowes says his wealthy friends have no trouble with the idea of paying more.

"Unless the system continues to exist and is safe and sound, nothing is worth anything," he said, "and it's the preservation of the system that has to be in the forefront of everybody's mind. We're getting over the narcissism we lived with for so many years. We're going back to the realization that self is not the entire answer anymore."

Delegate Jennie M. Forehand, D-Montgomery, said the Linowes proposals will be carefully scrutinized: "Linowes and the crowd he runs with are thankful they can put a little extra in the pot. The rest of us look at ourselves as the fatted calf that's getting ready to be sacrificed."

Examining the election results yet again, Delegate James C. Rosapepe, D-Prince George's, wonders whether legislators are not following their fear out the window. An argument can be made, he suggests (without making such an argument), that the time to raise taxes is when you need money.

He also finds "some force in Linowes' argument about the election. What the voters were upset about clearly is growth. To the extent I can distill a message from the election, it is that we don't want to pay more for a decreased quality of life."

Maryland's General Assembly leadership has been content in recent years to control spending. Its adherence to specific spending limitations has saved the state, the leaders say, from the nightmarish deficits that face other states. There is, no doubt, merit to their contention.

Yet, the sacred text known in Annapolis as "spending affordability guidelines" may be insufficient for accomplishing all the tasks given to government. Merely husbanding the revenues that arrive on the government's doorstep at tax time may not be enough, Mr. Rosapepe says.

"There is some burden on the government and the General Assembly to increase the quality of life. There may be arguments against following growth with new highways to meet need as we do now and trying instead to guide growth," Delegate Rosapepe suggested.

If people are moving out of Baltimore to suburban counties, for example, the pressure on government to spend for new roads and new schools increases. Simultaneously, the city -- which already has schools and roads -- loses its most able taxpayers. Therefore, if saving public dollars is the objective, improving Baltimore's schools should be a high priority, he said, because an uneducated populace is a crime-ridden, dependent and costly populace.

It would be smart not to overlook the fairness argument made by Mr. Linowes, Mr. Rosapepe said: "I don't find a lot of people who think the system we have is fair. We have one of the least progressive income taxes of any state, one of the least broad-based sales taxes and one of the more confusing property taxes.

"Isn't it worth taking a look at how we could make them simpler and more fair?"

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