House approves $200 million-plus package of taxes


The House of Delegates approved a $200 million-plus package of budget-balancing taxes yesterday after a Republican effort to unravel the proposal failed.

The 89-47 vote, which largely followed party lines, authorizes a series of corporate taxes and fee increases that Democratic House leaders say are an unpleasant but a necessary part of the state's $22.6 billion budget for the coming year.

"In tough times, you have to take tough votes," said House Speaker Michael E. Busch. "I wish I could come here every year and give money away."

In preparing its budget, the House has raised more money from taxes and made deeper cuts than Gov. Robert L. Ehrlich Jr. proposed, mainly because legislative leaders are wary of the governor's plan to raise money through slot machines.

Yesterday's vote had a distinctly partisan tone, with Democrats cheering that they had amassed a veto-proof majority and Republicans predicting that lawmakers in conservative areas would pay a penalty.

Within minutes, Republicans were distributing handouts showing that one Democrat who had signed a pledge from the Maryland Taxpayers Association - Del. Theodore J. Sophocleus of Anne Arundel County - voted for the bill.

"They had Democrats walk the plank on this bill," said Del. Alfred W. Redmer Jr., the House minority leader from Perry Hall. "In certain districts, people will go berserk."

The tax bill increases the annual filing fees paid by corporations. Currently, all businesses pay $100 a year, but the legislation creates a sliding scale that reaches $20,000 yearly for the largest corporations. Last week, Ehrlich endorsed the filing fee increase, but at a lower level.

The bill imposes a 2 percent tax on the premiums of health maintenance organizations, which are now treated differently than other insurance policies because they are exempt from taxes. It also closes certain loopholes, including one that allows companies to avoid taxes by shifting certain assets to shell corporations in Delaware.

Ehrlich opposes most of the ideas in the bill, although he and his aides have stopped short of saying they would veto them. Budget Secretary James C. "Chip" DiPaula said the HMO tax and other components are "excessive."

The tax bill now goes to the Senate, which is preparing its version of the budget. While senators have not talked as readily of new taxes, they have not ruled them out.

The plan does little to solve the state's long-term fiscal problems, and some lawmakers say increases in sales or income taxes might still be necessary.

Del. Howard P. Rawlings, chairman of the House Appropriations Committee, continued yesterday to promote the coupling of a 1-cent sales tax increase with a slots bill.

"There's a lot of developing support for tying slots and a sales tax together," Rawlings said. "If [Ehrlich] wants his slots bill, he'll have to take both."

Other supporters of a sales tax include groups that are pushing for Maryland to sustain a commitment made to public schools last year, when lawmakers passed a bill that followed the guidelines of the blue-ribbon Thornton Commission.

Advocates for Children and Youth, a nonprofit group, released poll numbers showing that 55 percent of voters in a survey said they would support a sales tax increase if it "will prevent cuts to programs for children with families."

About 200 people gathered near the State House last night for a rally to urge legislators not to cut money promised to schools in future years.

"We have to share our wealth with our babies," said Alvin Thornton, who led the panel. "Do not cut necessary constitutionally required funding for our children's education. It is not a political choice."

Sun staff writer Stephanie Desmon contributed to this article.

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