City tax increases weighed by council 7 members support higher piggyback rate; energy levy revived

THE BALTIMORE SUN

Three tax increases were proposed in the Baltimore City Council yesterday in hopes of offsetting a projected $18 million deficit in next year's city budget.

Second District Councilwoman Paula Johnson Branch gave an impassioned plea to resurrect the 10 percent increase in the piggyback income tax that was rejected last year.

Fourth District Councilwoman Sheila Dixon and 6th District Councilman Melvin L. Stukes sought support for the energy sales tax expansion that Mayor Kurt L. Schmoke proposed and then backed away from last week.

And 5th District Councilwoman Helen Holton pushed for a major increase in licensing fees for tow-truck operators.

None of the measures won decisive support. But Branch's piggyback tax, by far the most controversial of yesterday's proposed levies, did get six other backers -- the two other 2nd District council members, the three from the 6th District, and 4th District Councilwoman Agnes B. Welch.

With the state sending less aid to the city, "How can Baltimore continue to request funding when we have not utilized the revenue-generating authority given to us by the state to increase the piggyback tax?" Branch asked.

Baltimore can raise the local piggyback tax to a maximum of 60 percent of a taxpayer's state income tax bill. It now is 50 percent and Branch wants to raise it to 55 percent.

The tax increase, which would begin Jan. 1, would be expected to net the city $4.9 million for the fiscal year that ends June 30, 1998. In fiscal year 1999, the increased revenue would be $10.2 million.

"We need to stop nickel-and-diming special groups," Branch said.

If approved, the increase would be the first change in Baltimore's personal income tax rate since the piggyback tax was instituted in 1967. For a married couple earning $25,000 with two dependents and taking standard deductions, the increase would be $30 a year -- to $326 from the current $296. A couple earning $62,500 would pay $131 more -- $1,444 compared with $1,313.

Council President Lawrence A. Bell III said yesterday that he would keep an open mind concerning the proposed income tax increase. But he also noted that he would rather cut the budget.

Schmoke has said that he would sign the income tax increase into law if enough council members support it. For a tax increase to be enacted, 10 of the council's 19 members would have to vote for it.

Third District Councilman Martin O'Malley will hold public hearings May 22 on the piggyback tax proposal and the energy tax.

Despite outcries from nonprofit organizations, manufacturers and residents -- all of whom would have to pay -- Dixon insisted yesterday that the energy tax would provide the city with steady income over the years. Only commercial businesses now pay an energy sales tax in the city.

The levy would be 8 percent on manufacturers, 2 percent on nonprofit organizations and 4 percent on households.

In the first full year of the energy tax, the city would collect $20.1 million. About $8.3 million would come from households, $4.2 million from manufacturers and $800,000 from nonprofits.

City officials estimated that households would pay an average of $52 in taxes, a calculation apparently based on an annual energy bill of about $1,300, or $108 a month.

The tax "will provide growth to the city," Dixon said.

Holton's measure would require towing companies to pay a $250 application fee and a $250 license renewal fee. Current application and renewal fees are $20.

The city's proposed budget for the fiscal year beginning in July is being reviewed by the Board of Estimates. It is expected to be submitted to the council May 19.

Pub Date: 5/06/97

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