Annapolis -- Although I commend the Linowes Commission for its hard work and good intentions, I emphatically differ with its report, which is clearly out of step with the current economic climate, and accomplishes little but to raise more money for the governor to spend.
Its tax increases strike at the heart of the middle class, and in many cases, the poor as well. In addition, it is remarkable to me how devoid the report is of anything new, innovative or creative. After spending three years and almost a million dollars, the best the commission could come up with was an archaic idea like a personal-property tax on cars and boats and a $20 million tax break for the telephone companies. Implementing their recommendations in the current atmosphere of rising unemployment and slow growth would be like launching a set of unguided missiles into the state's economy.
The commission is selling its plan based on a tax-fairness theme, presumably meaning that its recommendations shift the overall tax burden from low-income to high-income taxpayers. Despite three years of study, however, the commission offers absolutely no data, research or evidence to support this alleged result. In the words of the commission's executive director, "they had to do a lot of guessing." The commission's chairman readily admits that they just don't know how many taxpayers will pay more and how many will pay less under their plan. Evidently, they want the voters and us to just take their word for it.
In fact, most of the recommendations fly right in the face of the "fair tax" theme. For example, the sales-tax rate would go up to 5.5 percent, which would hit the poor the hardest. Additionally, the commission wants to expand the sales tax to a host of services that its chairman contends would be felt mostly by the affluent. Services like dry cleaning, car repairs, shoe repairs, haircuts and cable TV -- all of which would be newly taxed -- are certainly not used only by the wealthy.
Also, the Linowes report contends that only upper-class families bear the increased income-tax burden. However, every taxpayer with taxable income over $27,400 will pay more income taxes under the Linowes plan. That sounds to me like a lot more than only the wealthy. In actuality, the tax increase hits Maryland's middle-class taxpayers right between the eyes.
Imposing a personal-property tax on cars and boats would take the state back a couple of generations. In a state that's light on mass transit and heavy on automobile travel, this tax would be onerous to citizens across the entire socio-economic spectrum. Obviously, the personal-property tax is not exactly on the cutting edge of 1990s tax policy.
The commission wants to increase the top personal income-tax rate to 8.75 percent (giving Maryland the seventh-highest rate in the country), and make the tax more progressive. First of all, the progressivity of our income tax has dramatically improved, due to legislation enacted during the late 1980s that was targeted to the low-income groups. But if the commission still felt more progressivity was needed, it could have proposed such a change without raising rates.
In addition, the current economic downturn highlights the difficulty our current system has generating sufficient revenues in a steady, stable manner during hard economic times. Yet the Linowes proposed income-tax restructuring would make our revenues even more vulnerable to the inevitable swings in the economy.
The commission claims it wants to reduce the property-tax burden, but in this case, it's all smoke and mirrors. In 1992, 40 percent of all Maryland homeowners will pay lower property taxes due to the 10 percent assessment cap enacted by the legislature last session. Incredibly, the commission wants to repeal this legislation and raise the property taxes on those home owners. Also, the report recommends that property-tax rates be applied to 100 percent of a property's value rather than the current 40 percent. The commission fails to point out that this paves the way for future tax-rate increases that will cost the homeowner two and half times an much as under the current system.
Senator Levitan, from Montgomery County, is chairman of the Budget and Taxation Committee.