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Lowering Md. corporate tax a bad idea

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The Sun's recent editorial, "Raise wages — no strings attached (Sept. 9), correctly debunks politicians' false linkage of the minimum wage with corporate taxation and observes that "uncertainty surrounding the federal sequester" makes the prospect of reducing corporate tax revenue "all the more risky."

However, not mentioned was the long overdue need to enact "combined reporting" to close the grossly unfair loophole that allows half the multi-state corporations earning revenue in Maryland to pay the state no income tax at all, according to analysis by the Maryland Comptroller. Other reports have named Comcast, Pepco, Verizon, American Express, Wells Fargo, Southwest Airlines and similar companies as paying no Maryland income tax at all in one or more recent years. These are among the largest and most profitable American corporations which continue to sit on trillions of dollars in cash because consumer demand is too weak to justify new investments and new hiring.

Combined reporting, in which a multi-state company operating in Maryland aggregates all their related companies for tax purposes, is the long overdue solution to plug that breach that favors and effectively subsidizes multi-state corporations and shareholder profits. It would help level the competitive playing field by making these biggest companies pay, just as local Maryland-based businesses must. It would stop the fiscal bleeding and begin recovery of hundreds of millions for education, jobs, transportation, infrastructure health care and other vital services that all Maryland's families and businesses depend on. The Maryland Department of Legislative Services estimated that if combined reporting had been in effect in fiscal 2013, the state would have collected an additional $154 million.

As for cutting the corporate tax rate, your editorial ignores the overwhelming evidence it would be a net revenue-loser for the state, put the government in the inappropriate position of picking business "winners" and "losers," and fail to produce growth while further shifting more of the tax burden onto low and middle income families.

The evidence is likewise clear that companies are highly unlikely to leave Maryland, or decide against locating here, because of its tax rate. Maryland's rate is lower than that of Pennsylvania, the District of Columbia and Delaware (8.7 percent) and a little higher than Virginia's and West Virginia's. Numerous surveys and studies also demonstrate that more important to corporate leaders than state taxes are a well-educated, highly productive workforce, access to markets and suppliers, sound infrastructure, and a high quality of life for employees. The two proven ways to provide this are through effective public spending and raising the income of working families who, unlike the rich, will spend their income quickly on needed goods and services, creating both more jobs and a stronger economy. Expenses for labor, property, equipment, construction and transportation are far more substantial.

Moreover, cuts in public services would cause cuts or elimination of contracts with private businesses, in turn forcing them to cut jobs, wages, and hours, or even relocate. In addition to increasing costs for jobless and other public assistance, even the remaining workers would then have less to spend, decreasing customer demand — something far more important to businesses.

Dropping Maryland's corporate tax rate from 8.25 to 6 percent, as Attorney General Doug Gansler and some others propose, would reduce state revenue by about $300 million a year. Due to balanced budget requirements, any benefit from a tax cut must be offset dollar for dollar and would result in no net economic gain in the short-term. The resulting reduced investment in education, transportation or public safety, all of which have been shown to boost the economy over the long haul, would jeopardize Maryland's economic security and future.

The nation and our state continue to suffer from a weak economy that is the direct result of the concentration of economic and political power at the top, and for which average working families and small, locally-owned businesses continue to pay the highest price. To ask those very same families and businesses to also put up with worse schools, slower transportation, higher crime, dirtier air and water, and more expensive health care is to add insult to injury. Rather than cut, we must restore and enhance government services and investment lest we mortgage our future as well as our children's and grandchildren's.

Kate Planco Waybright, Silver Spring

The writer is executive director of Progressive Maryland.

Copyright © 2014, The Baltimore Sun
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