Senate Democratic leaders are promoting a tax-cut plan that would set aside as much as $200 million in a dedicated account to finance a future reduction in Maryland's personal income tax.
The effort is seen as a possible compromise between House Speaker Casper R. Taylor Jr., D-Allegany, who wants the legislature to approve a 3 percent tax cut this year, and fellow Democrat Gov. Parris N. Glendening, who wants consideration of tax relief delayed for at least a year.
The new proposal by Senate Democrats is a measure of the tax-cut fever that has struck the General Assembly. It arrived in the wake of the strong showing in the last election by tax cut proponent Ellen R. Sauerbrey, the Republican gubernatorial candidate.
Senate Republicans, meanwhile, held a news conference yesterday to reiterate the GOP campaign pledge to approve a 6 percent tax cut now and a 24 percent cut over four years.
Sen. Barbara A. Hoffman, D-Baltimore, chairwoman of the Senate Budget and Taxation Committee, said putting the money in a dedicated account that could be spent only on future tax relief would allow legislators to promise tax cuts, but do so responsibly. A 6 percent tax cut would cost the state about $200 million in revenue annually.
"We can't predict what our revenues are going to be next year because of the federal government," Ms. Hoffman said. "I think it would be very imprudent to do a 6 percent income tax reduction this year."
Ms. Hoffman said her committee has yet to work out specifics of how the fund would work. But any withdrawals would probably require approval from a majority of the 28 delegates and senators who serve on the legislative policy committee. The idea is to formally approve the tax cut during next year's legislative session, effective for calendar 1997.
Mr. Taylor said Ms. Hoffman's proposal may promise tax relief, but would allow the legislature to come back next year and spend the money on something else.
Mr. Taylor said he has not heard anything to "close the door" on making a decision to cut taxes by 3 percent. In fact, he would like to see the state impose similar tax reductions each year for three or four years.
"I think it could be a great step forward for Maryland's business climate if we could lower the income tax this year," Mr. Taylor said. "Barbara's approach sends a more defined message to the public, but anything not delivered is just a promise."
In an afternoon news conference, Mr. Glendening said he remains strongly opposed to the General Assembly cutting income taxes now. He has recommended setting aside $200 million for contingencies, but not with strings attached.
But for the first time, he publicly supported creating a "very tight reserve fund" of $200 million controlled by both the governor and legislature and "dedicated to helping us with that personal income tax reduction next year."
"I think it would be foolhardy to move today to reduce income taxes by some small amount . . . and then find ourselves in a position of fiscal crisis and have to raise taxes the next year," Mr. Glendening said.
But the 15 Senate Republicans led by Minority Leader John A. Cade, a member of the budget committee, said any future budget shortfalls should be balanced by spending cuts. Better to put money in the pockets of taxpayers now than in a "slush fund," said Mr. Cade, a Republican from Anne Arundel County.
"We don't support putting money in a sock and having it available for whenever," he said.
The Republican proposal would eliminate the lowest income tax bracket of 2 percent for those making up to $1,000, increase the maximum personal exemption by $1,000 for individuals and $400 for married couples. The average family of four would save $220.