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Tax break festival in full swing

With an eye on November, legislators want to give everyone a helping hand to the tune of millions of dollars

Friday, March 3, 2006

ANNAPOLIS — A blind, illiterate Martian would know it’s election year in Maryland just by the slate of tax breaks lawmakers are considering.

One measure would cut the income taxes for retired police officers and firefighters. Another trims property taxes, and people who own historic buildings would get a tax credit. Several legislators are proposing an increase to the exemption for blind and elderly taxpayers.

‘‘It’s par for the course for an election year,” said Del. John L. Bohanan Jr. (D-Dist. 29B) of California.

Bohanan said he would like to find tax breaks for several groups, offering incentives for teachers and firefighters to afford homes.

‘‘We try to parcel these out carefully,” he said.

Several of the tax breaks carry hefty price tags.

A bill that would put the state in line with federal changes to inheritance taxes would cost the state $32.1 million, according to legislative budget analysts.

Another measure that would exclude military retirement income carries a $17.2 million price tag. And a similar measure — this time excluding retirement income for law enforcement, firefighters and rescue personnel — would cost $15.5 million, the analysts say.

Lawmakers are also trying to craft property tax relief. A proposal that has House Speaker Michael E. Busch’s support will cost $34.2 million, according to estimates.

Busch said the House this year would approve the retired firefighters tax break, as well as property tax relief and the military retiree tax break. He also pledged the General Assembly would pass a teachers’ pension enhancement, too, projected to weigh in at $500 million.

‘‘We’re here to represent our public service employees who live with us, work with us and protect our communities,” said Busch (D-Dist. 30) of Annapolis.

The tax breaks do not impress Christopher Summers, president of the Maryland Public Policy Institute.

‘‘I’m all for cutting taxes, and there’s always room to cut taxes. But if you’re serious about it, come to the table and talk about serious tax relief,” he said.

The people who propose the tax credits are either ‘‘Swiss cheesers” or ‘‘fonduers,” Summers said: Either they cut out holes in the tax code to target specific constituencies or they spread the tax breaks out to all taxpayers.

‘‘It’s all election-year silly tax gimmicks,” said Summers, whose organization is in Germantown.

The tax break debate, however, is being played out as the Democratic-controlled legislature and Gov. Robert L. Ehrlich Jr. (R) spar over the budget.

Ehrlich unveiled his $29.6 billion budget blueprint with a series of events in December and January. Likewise, he is staging a similar series of events to contest proposed cuts. One is planned for today in which he criticizes potential reductions to environmental programs.

The Democrats fire back that no budget decisions have been made and the proposals are coming from the Department of Legislative Services, the nonpartisan research arm of the legislature.

‘‘There’s an inherent judgment on their part that just spending the money is a good thing. But it’s not,” said Del. Murray D. Levy (D-Dist. 28) of La Plata.

On Tuesday, Ehrlich focused attention on his public safety budget, where lawmakers have been presented with $35 million in reductions.

‘‘The cuts being considered by our lawmakers will weaken the state’s ability to effectively protect the public,” Ehrlich said in a statement.

But Democrats detect a whiff of November in the governor’s complaints. One of his objections is a pay raise for correctional officers that would be retroactive to Jan. 1, part of an effort to recruit and retain officers for the state’s prisons. But the cost would be $15.5 million, and lawmakers say the state has never offered a retroactive pay raise before.

‘‘I think it’s his way to get before the cameras in an election year,” said Del. Joan Cadden (D-Dist. 31) of Brooklyn Park.

The budget bickering comes in an unusual fiscal year. How will the state pay for the final year of Thornton Commission education aid formula? How much will the state put aside for $20 billion in its future retirees’ health care? What steps can the state take this year to fend off forecasted deficits?

And all these questions come as revenues are strong and lawmakers want to grease their re-elections with tax cuts.

Some of the tax cut proposals come with the backing of some of the powerful people in Annapolis.

Ways and Means Chairwoman Sheila Ellis Hixson (D-Dist. 20) of Silver Spring, for example, has sponsored the tax break for the retired firefighters, dubbed the Hometown Heroes Act.

Senate President Thomas V. Mike Miller Jr., however, notes he has proposed no tax cuts of his own. And he points out that Hixson’s bill has no Senate counterpart.

Does that mean it won’t pass?

‘‘What do you think?” he answered with a sideways glance.

‘‘The governor has pushed fiscal insanity in terms of his overly generous spending, and the General Assembly is not going to reciprocate,” said Miller (D-Dist. 27) of Chesapeake Beach.

Staff Writer Thomas Dennison contributed to this report.

Underconsideration

Teachers pension enhancement. The state teachers union projects the first-year cost at $500 million.

Expansion of the property tax ‘‘circuit breaker.” Cost: $34.2 million.

Recoupling the state inheritance tax to federal law. Cost: $32.1 million.

Expansion of a tax credit for long-term care insurance. Cost: $28.1 million.

Changes to the earned income credit. Cost:$28.1 million.

Excluding retirement income from military. Cost: $17.2 million.

Excluding retirement income for law enforcement, fire, rescue and emergency workers.Cost: $15.5 million.

A tax credit for employers to pay employee child care. Analysts provide an uncertain estimate of$5.8 million.

A tax break for long-term caregivers. Cost:$4.5 million.

A tax credit for buildings using clean energy.Cost: $3.3 million.

An income tax credit for first-year teachers. $2.1 million (starting in FY08).

A credit to the vehicle excise tax for electric and hybrid vehicles. Cost (to the Transportation Trust Fund): $4 million.

Security enhancements to apartment buildings. Cost: Analysts say an unreliable estimate puts the loss in state revenue at$3.2 million.

Changes to the tax credit for historic buildings. Cost: $3.1 million (beginning in fiscal 2009)

Changes to the rules applied to reservists and National Guard members. Cost: $660,800.