ABERDEEN -- Gov. William Donald Schaefer will reverse himself and submit a bill to end the "snack tax," which became a symbol of Maryland's troubled business climate when it threatened to choke off expansion of a hard-won Frito-Lay production line here.
"We are going to introduce the bill before I leave office," Mr. Schaefer said yesterday after coming to the plant from Annapolis to mend fences with officials of Frito-Lay Inc., the PepsiCo subsidiary, which had put Maryland virtually off-limits for future expansion after the Schaefer administration repeatedly refused to ask the General Assembly to repeal the 1992 law.
With Mr. Schaefer's term due to end Jan. 18, his power to affect the snack tax is limited. But he will have the legal power to introduce a bill, because the General Assembly session opens one week before he turns over the office to Gov.-elect Parris N. Glendening.
Legislative leaders seemed to leave the door open yesterday to repealing the tax.
"I'm in favor of it, if it is done properly and perhaps in stages -- jTC with the caveat that it is compatible with our fiscal situation. But conceptually, yes, I am very much in favor of it," said House Speaker Casper R. Taylor Jr., a Democrat from Allegany County.
State fiscal officials said yesterday that one plan under serious consideration is to "phase" in the repeal's impact by having the tax go off the books on Jan. 1, 1997. That would spread its impact over two fiscal years.
Senate President Thomas V. Mike Miller Jr., a Democrat from Prince George's County, was more cautious.
"I'm in favor of talking to the governor-elect about the proposal and seeing how this idea fits in with his budget plans," he said.
He said that he and other senators have not discussed the idea of repealing the snack tax.
"The governor-elect, during the campaign, promised tax cuts, selected tax cuts," Mr. Miller said. "I think it would be incumbent upon us to get him sworn into office, let him look at the budget situation, listen to what his recommendations are and what selected tax cuts he wishes to propose."
Mr. Glendening could not be reached for comment yesterday.
Yesterday's visit to Frito-Lay's $35 million pretzel factory and snack warehouse "convinced me that if we take off this tax, this company alone can increase business here fast enough that it will more than make up the revenues in the form of additional income, real estate and other taxes that will be generated," Mr. Schaefer said.
State officials have trouble estimating the revenue from the snack tax, which is in effect a portion of Maryland's 5 percent sales tax and hard to break out from overall sales-tax revenues. ++ Their estimates have ranged from $12 million to $22 million a year, a minuscule portion of the state's budget of about $17 billion.
Maryland's sales tax does not apply to foods, but the snack tax partially broke that barrier by extending the sales tax to include -- selected categories -- which happened to include most of Frito-Lay's products, including pretzels, but excluded many of its competitors' lines, such as baked crackers.
The tax became Exhibit A among business executives who say Maryland often shoots itself in the foot by imposing taxes without considering their impact upon economic development.
"The snack tax . . . puts Maryland at a distinct competitive disadvantage for obtaining the capital investments that Frito-Lay will make," Steven S. Reinemund, the firm's president, said earlier this year.
With Frito-Lay's pretzel sales exploding in the area the Aberdeen plant serves, those investments -- and the numbers of jobs they could create -- are potentially substantial.
"Our pretzel sales in this plant's area have grown by 164 percent over the past year, and we are projecting comparable growth for the next year," Homer Gowan, the plant manager, said after leading the governor on the tour yesterday.
"Pretzel sales are really hot right now. And if the state makes an early show of good faith on this tax question, the timing is just perfect and could lead to a substantial increase in investment and jobs at this plant," Mark L. Wasserman, the state's Secretary of Economic and Employment Development, said after the tour.
The plant opened in the fall of 1993 with 45 employees, had 110 employees when two pretzel production lines went into service earlier this year, and now has about 150 workers, Mr. Gowan said.
When two additional pretzel lines come into service early next year, the payroll will grow to about 235, he said, and the plant could add other products and expand to 600 or more employees by adding products over the next six or eight years.
"I did not know the impact that this tax might have. I knew it was not a good tax -- any tax on business is a bad tax -- but when you are desperate for money, we didn't have any choices," Mr. Schaefer said yesterday.