- The Washington Times - Sunday, February 19, 2006

ANNAPOLIS (AP) — It’s an election year, and Maryland is running a budget surplus of more than $1 billion, a confluence of events that might be expected to produce demands for a big tax cut that would put hundreds of millions of dollars back in the pockets of constituents.

But one-third of the way through the 2006 legislative session, discussion of taxes has been muted almost to the point of inaudibility.

Maryland Gov. Robert L. Ehrlich Jr., a Republican, and leaders of the Democrat-controlled General Assembly have proposed some modest tax reductions, including cutting the state property tax and exempting veterans’ pensions from the state income tax.

Mr. Ehrlich also wants to follow the federal government’s lead and eliminate the estate tax, and he has proposed some small-business tax credits. House Democratic leaders have suggested a partial income-tax exemption for pensions collected by retired fire, police and emergency care workers.

But even if all of those proposals are approved before lawmakers wind up their session April 10, the tax relief would amount to less than 20 percent of the projected surplus of about $1.2 billion when the state’s fiscal year ends June 30.

Mr. Ehrlich’s plan would reduce the property tax by about $110 million, save veterans about $10.3 million in income taxes and eliminate $14 million in estate taxes. He also is proposing a $3 million income-tax break for people who provide long-term care for disabled family members.

Bigger tax cuts would be popular in an election year, but lawmakers and Mr. Ehrlich aides are talking instead about the need for caution in handling the state’s finances.

They know big increases in spending will be required next year to cover growth in health care costs and the last installment of a $1.3 billion increase in school funding approved by the 2002 General Assembly.

James “Chip” DiPaula, Mr. Ehrlich’s chief of staff, noted that the governor has set aside $670 million to cover some of the mandated increases in spending that state officials will have to deal with next year.

“The governor thinks his budget is prudent and fiscally responsible,” Mr. DiPaula said.

He said Mr. Ehrlich “remains interested in other tax-reduction options,” but wants to smooth out the budget situation at a time when, despite strong economic growth, fiscal experts are still projecting potential deficits of about $3 billion over the next four years.

House Speaker Michael E. Busch, a Democrat, said his priority “is to fund the necessary programs — education, higher education, health care — make sure we provide the services that Marylanders expect for the quality of life that we have.”

In previous years, when the state was running big budget surpluses and Democrats resided in the governor’s mansion, Republicans in the Senate and House of Delegates consistently chided Democrats for not giving money back to the people.

This year, with one of their own in the governor’s office, they have been largely silent on the tax issue.

An exception is state Sen. E.J. Pipkin, Eastern Shore Republican, who has introduced a tax-reduction package that includes a 10 percent cut in the income tax phased in over three years.

“I’m putting my bills in to get the discussion started. Taxpayers should be at the table,” Mr. Pipkin said. “There is an underlying philosophy, ‘Whose money is it?’ I believe it’s the taxpayers money. I also believe taxpayers know how to spend their money better than government does.”

Despite his zeal for tax cuts, Mr. Pipkin declines to criticize Mr. Ehrlich’s budget, with its limited tax relief.

He noted that Maryland faced a $1 billion deficit when Mr. Ehrlich took office in 2002 and now has a surplus of more than $1 billion.

“It’s hard for Republicans to be critical when the governor has done such a fine job,” Mr. Pipkin said.

State Senate Minority Leader J. Lowell Stoltzfus of Somerset County said that despite what he described as “a one-time euphoria” about the current surplus, the state faces potential deficits in future years because of mandated increases in spending on programs such as Medicaid and aid for public schools.

“The need for this session is to be cautious,” he said.

House Majority Leader Kumar P. Barve, Montgomery County Democrat, said Republicans are being cautious about tax cuts because “they know we are in for big, big problems after the election.”

State Senate President Thomas V. Mike Miller Jr., a Democrat, said it would be a mistake to use the surplus to reduce taxes considering that Mr. Ehrlich hasn’t yet repaid all the cuts in aid to local governments and the money he stripped from state land-conservation programs in his three previous budgets.

Matthew A. Crenson, political science professor at Johns Hopkins University in Baltimore, said the surplus could be fleeting.

A tax cut in an election year might not help that much with voters because it wouldn’t be noticeable right away, Mr. Crenson said. “If you need a new school building or if you need the roads paved in your county, that’s something you are going to notice,” he said.


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