Md. House panel OKs half-billion in tax increases Floor fight expected from plan opponents

ANNAPOLIS — ANNAPOLIS -- The House Ways and Means Committee swallowed hard yesterday and narrowly approved a general tax increase that would hit Marylanders when they eat or smoke, when they drive or buy a car, or when they bring home their paychecks.

The huge tax bill would raise at least a half-billion dollars in new revenue for the state and give local governments authority to raise almost that much themselves.


Approved on a 12-10 vote following months of debate and two long days of intense negotiations, the plan now goes to the full House, where a floor fight next week with those opposed to any new taxes is certain.

Before resorting to taxes, House Speaker R. Clayton Mitchell Jr., D-Kent, pushed the Appropriations Committee to cut more from the governor's $12.5 billion spending plan for next year than the General Assembly has ever cut before.


Those reductions included cancellation of more than $254 million in state aid that otherwise would have flowed to Baltimore and the 23 counties.

But even with that, proposed spending for fiscal year 1993 is still some $175 million more than the state figures to collect from taxpayers for the year, prompting House leaders to turn reluctantly to taxes.

"This [tax] package was designed to prevent very substantial cuts in local school programs, police protection and health services," said Del. James C. Rosapepe, D-Prince George's, chairman of Ways and Means' tax subcommittee.

But House Minority Leader Ellen R. Sauerbrey, a Republican who joined her three Baltimore County colleagues on the committee in voting against the tax bill, said, "I watched it come together, and it was like watching a meeting of 'Overeaters Anonymous' out-of-control."

Mr. Mitchell said yesterday he was uncertain if he has the 71 votes required to pass the tax package. If he does, the plan will surely be sent to a joint conference committee to reconcile differences with a Senate tax plan passed earlier this month.

If approved, this would be the first major general tax increase in Maryland since the sales tax was raised from 4 percent to 5

percent in 1977.

Although both plans will send about $250 million in taxes into the general treasury, each house has proposed different ways of collecting the money.


The House proposal -- rolled into one fat piece of legislation that will give lawmakers a single chance to vote "aye" or "nay" on taxes -- would:

* Increase the state's tax on gasoline on May 1 by a nickel a gallon to 23.5 cents, a move that would raise $122 million to get the state's stalled highway construction program going.

To encourage fuel conservation, the bill also calls for creation of a unique titling tax on new "gas guzzling" cars and a companion credit plan for cars that are "gas sippers." The $30 million raised would be used to finance mass transit and bus operations in Maryland's two Washington suburban counties.

Truckers would be hit with half the nickel increase on diesel May 1, but the additional 2 1/2 -cent increase would be delayed until next Jan. 1. Eventually, the state also would add a 3/4 -cent surcharge for all heavy commercial vehicles.

The Senate has yet to vote on a gas tax plan, although senators were earlier talking about a 6-cents-a-gallon increase.

* Hit Maryland's wealthiest taxpayers by establishing a new 6 percent tax bracket for those with taxable incomes of $100,000 or more, a change designed to make the state's personal income tax structure more progressive. The Senate did not include this provision either.


* Boost the tax on cigarettes by 20 cents to 36 cents a pack to discourage young people from smoking and -- just as importantly -- to avert a threatened veto of the entire budget balancing tax package by Gov. William Donald Schaefer if the 20-cent tax increase was not included. The Senate version called for a dime-a-pack increase.

* Increase the corporate income tax rate, bring in more revenue by changing the way long-distance calling is taxed, and make a number of enforcement and compliance adjustments in the way taxes are collected.

* Close tax loopholes by extending the state's 5 percent sales tax to cover the sale of potato chips, pretzels and other snack foods, prepared food sold in grocery stores and in college and hospital cafeterias, newspapers, dietary animal food, car phones and beeper services.

The House, however, decided against extending the sales tax to cover the cost of personal services, which the Senate had done by extending the tax to dry cleaning, and which Mr. Schaefer proposed for a variety of other services.

To offset the extraordinary and permanent reduction in a variety of state aid programs, the Ways and Means Committee also voted to give local jurisdictions authority to raise their maximum piggyback income tax rate from 50 to 60 percent.

The omnibus bill also bestows on local governments that do not currently have it broad authority to levy new taxes on property transfers, utilities, cable television, hotels and motels, boat slips, private landfills, and even gaming events such as bingo games or casino nights.


But David Bliden, executive director of the Maryland Association of Counties, said it was "a completely absurd assumption" to think that all or even most of the state's major jurisdictions would increase their piggyback tax rates to the maximum 60 percent.

"There's not an overwhelming sentiment out there for new taxes, obviously. And it would be a local decision, which will be more responsive to local citizens," he said. "Local governments were cut significantly, so it only makes sense to give them flexibility to adapt."

To make the deep budget cuts and tax increases palatable to legislators squeezed by constituents who want services maintained but oppose higher taxes, House leaders put together an aid package to offset some of the local government reductions. The plan was constructed to gain the political support of Prince George's and Montgomery counties and the city of Baltimore.

It includes a $30 million "disparity grant" for Baltimore and the state's five poorest counties (Allegany, Caroline, Dorchester, Garrett and Somerset), which have an income base well below the statewide average.

It also includes $21.4 million from the "gas guzzler" tax that would permit the state to fully subsidize subway and bus operating costs now paid by Prince George's and Montgomery counties.

The state already has such an arrangement for mass transit costs in Baltimore.


The local aid package also calls for restoring $15 million to pay for the special education costs of disabled students, a program that affects every jurisdiction in the state.


The plan adapted yesterday by the House Ways and Means Committee would:

* Create a new 6 percent personal income tax bracket for Marylanders with taxable incomes of $00,000 or more.

* Raise the state's 18.5-cents-a-gallon.

* Begin taxing the sale of "gas guzzler" vehicles, while giving tax credits on the sale of fuel-efficient vehicles.


L * Raise the tax on a pack of cigarettes from 16 to 36 cents.

* Apply the state's 5 percent sales tax to now-exempt products, including snack foods, food sold in cafeterias, prepared foods sold in grocery stores and newspapers.

* Give Baltimore and the 23 counties authority to raise their maximum piggyback income tax rates from 50 to 60 percent.

Roll call vote

Here is how the House Ways and Means Committee voted yesterday on the House tax package:

Yes (12):


Clarence Davis, D-Baltimore

Sheila E. Hixson, D-Montgomery

Mary A. Conroy, D-Prince George's

James W. Campbell, D-Baltimore

James C. Rosapepe, D-Prince George's

Donald C. Fry, D-Harford


Salima S. Marriott, D-Baltimore

Anne Healey, D-Prince George's

Robert A. Thornton Jr., D-Talbot

Beatrice Tignor, D-Prince George's

Henry B. Heller, D-Montgomery

Henry R. Hergenroeder Jr., D-Baltimore


No (10):

Paul E. Weisengoff, D-Baltimore

Michael J. Sprague, D-Charles

Michael R. Gordon, D-Montgomery

Louis L. DePazzo, D-Baltimore County

Ronald Franks, R-Queen Anne's


John J. Bishop, R-Baltimore County

Ellen R. Sauerbrey, R-Baltimore County

Theodore Levin, D-Baltimore County

Thomas H. Hattery, D-Frederick

Elizabeth S. Smith, R-Anne Arundel

Not voting (2):


Tyras S. Athey, D-Anne Arundel

(chairman, votes only to break ties)

Gene W. Counihan, D-Montgomery