An influential Baltimore-area legislator is again proposing a tax cut for some of Maryland's wealthiest residents, though with a potential price tag of tens of millions of dollars, its prospects may be slim.

The tax cut, proposed by Democratic Sen. Barbara A. Hoffman, chairwoman of the Budget and Taxation Committee, would benefit the dozens or hundreds of people each year who reap at least $1.3 million in capital gains, capping their taxes on those gains at $104,000 per taxpayer.

Hoffman, who is pushing for the cut for the third straight year, has argued the state risks losing the philanthropy of wealthy taxpayers if tax laws discourage them from living in the state.

One former Maryland taxpayer -- businessman, philanthropist and campaign donor John C. Erickson -- asked for the legislation, which he has told lawmakers might persuade him to move back from Florida, where he resides because the state has no capital gains tax.

The bill passed the Senate last year but died in the House. This year, Del. Sheila E. Hixson, the Montgomery County Democrat who chairs the House Ways and Means Committee, has agreed to sponsor the legislation, and Hoffman has higher hopes.

'This bill will not fly'

Senate President Thomas V. Mike Miller cautioned yesterday that the legislation likely will not move forward, unless new economic figures show a large enough budget surplus to allow acceleration of Maryland's five-year 10 percent income tax cut as well.

"Certainly we're not going to single out higher-income tax brackets to benefit when we have working people in middle-income tax brackets that haven't yet been taken care of," said Miller, a Prince George's Democrat. "This bill will not fly of its own volition, I assure you."

Gov. Parris N. Glendening has not taken a position on the proposal, but has said he does not want to speed up the income tax cut this year, expressing a preference for spending programs over tax cuts.

The unpredictable, potentially high cost of the capital gains cut could hurt the bill's chances. Capital gains taxes -- on the sale of stock, real estate and businesses -- have been the fastest-growing part of state income tax collections during the booming stock market.

Potential losses

Legislative analysts say the tax break would have cost the state $6.5 million in 1995, with 91 taxpayers having enough gains to qualify, and $45.8 million in 1996, with 231 taxpayers having enough gains. Some officials believe it would cost tens of millions more today.

County governments also could lose millions in local income taxes.

"The huge revenue loss is going to cause a lot of people to take a real close look at this," said Montgomery County Executive Douglas M. Duncan, whose fiscal analysts estimate that the tax loss for the state could be $100 million a year -- and $15 million for Montgomery.

"That's just a huge hit to us, and it benefits extremely few people in the state," Duncan said.

'It benefits everybody'

The Maryland Constitution prohibits laws designed to help one person, or laws without a rational basis that benefit one class of people, said Assistant Attorney General Robert A. Zarnoch.

Zarnoch said that since the bill would apply to more than one person and has a plausible rationale behind it, it would pass constitutional muster.

One powerful supporter of the legislation, House Speaker Casper R. Taylor Jr., argues the tax cut would help more than the people wealthy enough to qualify.

"It benefits everybody," said the Allegany County Democrat, who spoke with Erickson about the idea two years ago. "These kinds of people with their affluence not only add to the philanthropic community, which reduces the burden on state government for social welfare programs, but they also create jobs."

'Shake down the state'

Some critics see the potential philanthropists in a different light.

"I think it's the very wealthy trying to shake down the state of Maryland," said Sen. Paul G. Pinsky, a Prince George's Democrat. "I find it extremely offensive."

Erickson, a multimillionaire developer of retirement communities, has donated millions to various causes and institutions, including the University of Maryland, Baltimore County.

Erickson, his wife and his companies also have given more than $20,000 in campaign contributions to state political candidates, including Taylor and Glendening. Erickson could not be reached for comment yesterday.

Sun news researcher Paul M. McCardell contributed to this article.

Pub Date: 3/07/99