Legislative advisory panel considers business taxes

Maryland is one of the few states in the Mid-Atlantic to raise its corporate tax rate in the last 10 years, the head of the Greater Baltimore Committee said Wednesday, urging a drastic reduction he said would help change perception of the business climate.

The proposal was one of several presented to the Augustine Commission, a 25-member group of business and political leaders that has been examining the state's business climate since last year. Wednesday's meeting in Baltimore was the commission's third focused on the state's tax structure, as members gather information to prepare recommendations for the next legislative session.


Donald C. Fry, president and CEO of the Greater Baltimore Committee, urged the commission to include a reduction in the state's corporate income tax rate, which he said has an outsize effect, contributing to the state's relatively poor showing on some business climate rankings while raising a relatively small share of state revenue.

The increase in the corporate rate from 7 percent in 2007 to 8.25 percent in 2008 was unusual compared to nearby states, such as New York, North Carolina and West Virginia, which have moved in the other direction, Fry added.


"If you took it down to 5.5 percent, and reduced it lower than Virginia, you would be making some news," Fry said.

The Augustine Commission, headed by former Lockheed Martin CEO Norman Augustine, earlier this year persuaded legislators to adopt a series of business-friendly recommendations, including bills to create customer service training for state employees and a council to review state regulations.

But building consensus around tax changes is expected to be more difficult.

Several of the ideas business advocacy groups presented to the panelists Wednesday morning, including lowering the corporate tax rate, have been debated repeatedly.

The Maryland Chamber of Commerce said the commission should create a tax exemption for the owners of businesses, mostly small, whose company profits are taxed on owners' personal returns. Similar proposals did not move forward in the legislature in 2013 and 2014.

The chamber also suggested the commission recommend that legislators reject adoption of a combined reporting structure, which would change the way companies operating in multiple states through affiliates are taxed.

Such bills have failed repeatedly, but advocates say combined reporting — in which the state calculates its share of taxes based on a firm's full profits rather than those of the separate legal entity organized in Maryland — reduces corporate tax sheltering.

The Chamber of Commerce has consistently opposed the idea.


The debate "creates a degree of uncertainty to the business climate in Maryland," said Herman B. Rosenthal, a partner at the Whiteford Taylor Preston law firm, who spoke during the chamber's presentation. "We would urge the commission to include a definitive statement to take that off the table."

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Augustine said the commission hasn't come to any conclusions. The next meeting is scheduled for October.

He said he is optimistic that the commission will find changes the legislature can support, given the backing for its work from both Republican Gov. Larry Hogan and state Democratic legislative leaders, who created it.

"Rarely do the planets align to improve the business climate and job creation as they have in Maryland today," Augustine said. "So if we can't do it today, it probably won't get done."

At least one recommendation — notably not an immediate move to change the tax code — appeared to spark interest: the chamber's suggestion that the state start to offer guidance to companies on tax questions by private-letter rulings, as the federal government and 32 other states already do.

David R. Brinkley, Hogan's secretary of budget and management and until January a longtime member of the state Senate, said after the session that the idea was new to him, but he supports it.


"I don't see that costing a lot, if anything," he said. "That's kind of a no-brainer."