Looking warily to the 1998 elections, Democratic leaders in the House of Delegates tried yesterday to generate legislative momentum for tax relief with a new plan to cut the income tax by 10 percent over three years.
The tax cut proposal -- designed to bridge broad policy differences within the legislature's majority party -- would be balanced in part by new taxes on many telecommunications services.
After intense behind-the-scenes negotiations the past several days, House Speaker Casper R. Taylor Jr. unveiled the omnibus tax bill and convened a special meeting of the 100 Democrats in the House to discuss it and to press for party unity.
Searching for consensus between the conservative and liberal wings of the party, the proposal provides a new mix of tax relief -- combining a cut in the income tax rate most Marylanders would pay with tax bracket adjustments that would benefit lower- and middle-class taxpayers.
Meanwhile, as the House was struggling with income taxes, a state Senate committee voted against Gov. Parris N. Glendening's proposed doubling of the cigarette tax, an important signal that the measure is in deep trouble in the General Assembly's upper chamber.
At the urging of the state's business community, Glendening has proposed his own 10 percent tax cut plan, based on a flat reduction in the 5 percent income tax rate over three years.
Last evening, Glendening said he supported much of the House proposal, but he criticized it for relying too heavily on new taxes on a variety of telecommunications services, such as the Internet and cable television.
"It is crucial we have a 10 percent income tax cut," Glendening told reporters. "It's also important we don't load up our citizens with a lot of other taxes."
At midday, Taylor told Democratic delegates that the governor supported the tax bill. Later in the day, after talking with Glendening, Taylor told reporters he had misunderstood the governor's position on telecommunications taxes.
In the past few weeks, Taylor has had trouble fashioning a tax package to appeal to a majority in the 141-member House.
Liberals have been reluctant to back a flat cut in the rate -- which would send the bulk of the tax savings to middle- and upper-class taxpayers while threatening funding for social programs.
And some conservative Democrats have bristled at the prospect of raising one tax to facilitate a cut in another.
But Taylor and his lieutenants worked this week on a compromise they hope can win a majority.
Implicit in the proposal is the desire by many Democrats to be able to cast a vote this session in favor of tax cuts to ward off expected Republican criticism in the 1998 elections.
Particularly vulnerable are Democrats from suburban and rural districts where anti-tax feeling is high, said several legislators.
"A lot of Democrats have promised their constituents they would vote for a tax cut," said Del. Michael E. Busch, an Anne Arundel Democrat.
"They have taken the party line for two years because they believed the governor and legislature would come back and offer a Democratic tax cut."
Del. Howard P. Rawlings, chairman of the Appropriations Committee, said a tax cut could be crucial insurance against a Republican takeover of the Democratically controlled legislature.
"We had better get a tax cut out there or that's exactly what they're going to get," said Rawlings, a Baltimore Democrat.
House Republicans also are looking toward the next elections.
As they have the past two years, Republicans plan to bring their own tax cut bill to the floor of the House of Delegates today.
The Republican bill would cut the income tax 6 percent over the jTC next year by raising personal exemptions. Their plan calls for cuts in the state's budget and includes no tax increases.
"The bottom line is, we want to do an income tax reduction with budget cuts," said Del. James F. Ports Jr., a Baltimore County Republican and lead sponsor of the GOP tax bill.
"We did not want to tie a tax cut to a tax increase. Period."
The Democratic bill, which was approved by a House Ways and Means subcommittee yesterday, would cut state income taxes by a total of 10 percent over three years.
In a concession to liberal lawmakers, it would make the income tax system somewhat more progressive. Under the bill, the state's top rate would drop from 5 percent to 4.65 percent for nearly all taxpayers.
Income of more than $200,000 for an individual and $350,000 for a couple would still be taxed at the 5 percent rate.
Also, the bill would abolish tax on income under $1,000 and would expand one lower tax-rate bracket significantly.
Under the proposal, the 4.65 percent rate -- which would be the top rate for most taxpayers -- would apply to income of more than $12,000. Under the current system, the 5 percent rate applies to income of more than $3,001.
The adjustments to the tax brackets could make the tax cut package more palatable to liberal Democrats in the Senate, many of whom are opposed to a cut in the tax rate.
The changes in the income tax system would mean a loss of more than $400 million in revenue for the state when fully enacted.
To make up some of that loss, the House bill includes new taxes on several telecommunications services, including Internet access, cable television and direct broadcast satellite.
It also would broaden the existing state tax on phone services.
In all, the House bill would bring in some $112 million in additional revenue in the fourth year, about a quarter of the revenue lost to the income tax cut.
"This bill delivers a $327 million tax burden reduction -- a bigger reduction than the Republican proposal, a smaller structural deficit than the Republican proposal and it does not destroy our social safety net," Taylor said.
"Overall, it's a winner."
Missing from the committee's bill was the governor's proposal to double the state's 36-cents-per-pack tax on cigarettes. Glendening reiterated last night his support for a cigarette tax boost, but said he was willing to compromise on the amount.
House leaders have decided to consider the tobacco tax apart from the income tax, partly because the cigarette tax faces strong opposition in the Senate.
Yesterday, that unpopularity was made clear when the Senate Judicial Proceedings Committee voted 7-4 against Glendening's cigarette tax bill.
The measure is still technically alive in a second Senate committee.
Pub Date: 2/27/97