We are disappointed that the Maryland General Assembly did not take action
to close corporate tax loopholes during the special session.
The companies who
avoid paying taxes cared intensely about preserving these loopholes – so much
so that they targeted “combined reporting” more than tax increases. After all,
if you don’t have to pay taxes, it doesn’t matter what the tax rate is.
Influencial
lobbyists and public relations firms managed to convince lawmakers that a well-established
policy to simplify taxes was an unproven and overly complicated measure. They presented
“combined reporting” as draining too much revenue from businesses that would be
required to pay and as not producing enough revenue to be significant. And they
successfully peddled a misleading report from Ernst & Young, a consulting
company whose business it is to sell tax avoidance schemes that would be
eliminated by the reform.
Corporate tax loopholes will likely gape even wider in coming years as a
result of this special session. When lawmakers raised the corporate income tax
rate by 1 percent but failed to close loopholes, they gave multi-state
companies even more incentive to transfer profits out-of-state.
As a result, Maryland’s tax system
will be less fair and individuals and in-state businesses will have to carry
the burden. When we face the tough choices ahead, let us not forget that one
reason for the funding gap is the scores of companies that were given the pass
to continue avoiding paying their fair share of taxes.
