Tax Reform Good for Business and the
Economy
Annapolis – Business leaders from across the state are
calling for closing of tax loopholes in support of Gov. O’Malley’s announcement
to close tax loopholes as part of the larger budget proposal.
Challenging the myth that closing the tax loopholes would be
bad for the economy, Maryland-owned businesses called for an end to
tax-avoidance practices allowed by our current tax code in Maryland.
“It’s outrageous that big
corporations aren’t paying their share while our schools are struggling to
provide textbooks for all the kids, and our roads and bridges are crumbling
around us,” said Mark Cook, proprietor of Cook Networking, an IT company based
in College Park.
“Asking big business to pay the same taxes we pay is not only fair, but makes
good business sense for the economy.”
According to the Comptroller of Maryland, 64 of the 132
largest for-profit corporations in Maryland
don’t pay any state income taxes.
Last week, Gov. O’Malley proposed “combined reporting” as a
comprehensive solution to corporate tax loopholes. Combined reporting would require
corporations with subsidiaries or affiliates to file a single tax return that
lists all of the conglomerate’s
business activity, rather than treating each subsidiary as a separate entity. Under
combined reporting, companies would no longer be able to shift money between
subsidiaries to veil profits and avoid paying taxes in a particular state.
“Businesses are good based on what they do—not based on
taxes,” said Keith Losoya, Executive Director of the Chesapeake Sustainable
Business Alliance. “Businesses are good because of good leadership, a good
product, and a good workforce — not tax breaks. Those who believe otherwise are
naive or have never run a company. Hard-working Maryland businesses deserve a level playing
field and we urge legislators to support Gov. O’Malley’s proposal to close
corporate tax loopholes.” The Chesapeake Sustainable Business Alliance is an association
of more than 100 local Maryland
businesses.
“This really is an issue of fairness,” said Johanna Neumann,
policy advocate for Maryland PIRG.
Opponents of combined reporting trumpet a statistic from an Ernst
and Young study commissioned by the Chamber of Commerce purportedly showing
that 18.3 jobs would be lost for every $1 million dollars of revenue gained by
combined reporting. However, the study assumes the increased revenue will not
be reinvested into the economy. In fact, Federal Highway Administration studies
show that their spending on public transportation yields 47.5 jobs for every
additional million dollars. Thus, based on the Ernst & Young study, using
revenue from combined reporting to enhance public transportation would actually
create a net effect of about 20 jobs in Maryland for every million dollars.
“Businesses that avoid taxes by using accounting tricks have
a strong interest in stopping the Governor’s plan to close tax loopholes,” said
Neumann. “Legislators should take a closer look before believing misleading
statistics provided by consultants for those who seek to maintain the status
quo.”
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