July 27, 1965

It has been my experience—and I suspect the experience of most
of you—that the major problems I have faced as Governor have been
related, in one way or another, to finances, and one which has plagued
me most persistently since I took office in 1959 has to do with the
complicated interrelationship of State and local governmental respon-
sibility and State and local finances. Of the total burden of govern-
ment in my State, Maryland, as measured in terms of expenditures,
the State bears about 30 per cent and the local governments bears
70 per cent. Both the State and local governments raise approximately
the same total annual revenue from the sources available.

This apparent discrepancy can be explained by the fact that a size-
able portion of the revenues which the State collects are turned back
to the local subdivisions to help them with their disproportionate share
of the total burden, in the form either of State aid for locally con-
trolled functions of government or in a sharing of State-imposed taxes.
But the problem in Maryland is not so much whether the State or the
local governments bear the heaviest burden of government. The prob-
lem lies in the tax structure itself. The State government has pre-
empted the lucrative sales and income tax sources. It also taxes busi-
ness and levies a small property tax for bond amortization, which varies,
according to current requirements, from around 15 to 18 cents per $100
of assessed valuation. From these sources it collects approximately 50
per cent of the total revenue. Local government, on the other hand,
which is required to raise about the same amount, depends almost
entirely upon one source, the property tax. This means that in
the support of local governments an unusually heavy burden has fallen
upon the shoulders of the property owners, particularly in Baltimore
City and the populous urban and suburban counties around Baltimore
and Washington, D. C.

The situation at present is difficult enough, but prospects for the
future are even more dismal. Under present revenue sources, a recent
study indicated that we face general revenue shortages of nearly $85
million at the local government level by 1969 and $50 million at the
State level. It is obvious, then, that our tax structure demands drastic
revision to give local governments a greater share in the major revenue
sources.

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