As Governor MARTIN O'Malley prepares
to sign controversial legislation handing out a total of about 15 million dollars to a successful subscription TV show,
wanted to know: Who and what else do we deem worth of paying less taxes than mere commoners?
Turns out that Maryland, like many states, has a lot of tax breaks for favored industries that are little known or discussed outside of narrow groups of business-incentive brokers and tax wonks. And while it is widely acknowledged that these tax breaks are not universally effective, the measures of these tax breaks' effectiveness are in their infancy. So we hand money to developers who want to develop polluted land, companies that want to make fuel from plants, and companies that need to run security background checks on their employees.
Heck, we give money to
kind of full-time job creators-up to $9,000 over three years for each job created.
We favor the people who own wineries with a 25 percent rebate on expenses such as barrels, bins, mowers, poles, presses, tractors, and vats-to name just a sample of the qualifying equipment. Think of it as a permanent, taxpayer-expensed 25 percent off sale. And you get these savings on top of the advertised sales price.
We also hand out tax credits to companies that expand or maintain businesses in federal Enterprise Zones, which are loosely defined as the geographical areas where poor people live.
There is a catch-all One Maryland Tax Credit for businesses moving in, and a research and development credit for companies moving up-or trying to. And we have a very significant pool of money for biotechnology investors to draw from, because (
Whitney Houston) we believe that biotech is the future.
This year taxpayers have made available $3 million for people who fund cybersecurity companies. Somewhat like the film and video deal, this program offers a 30 percent rebate on qualifying investment in a company that works in computer encryption, code breaking, network protection, and the like.
In fiscal 2014, the Department of Business and Economic Development (DBED)'s budget increased about 10 percent over the year previous. The department gets money from several sources, including the federal government. But the proportion of money from the General Fund-that is, state taxpayers-increased by more than 30 percent. Much of that increase derived from the new cybersecurity program and an increase in the biotech break. These two increases together, however, amount to just $5 million-less than half of the $11 million increase in the film and video tax credit the legislature just passed for FY 2015.
In other words, while we love science and wine makers and computer tech people, we love Kevin Spacey even more. (Because we
believe that gaffer tape is our future).
What follows is a summary of the money available, who qualifies, and (in some cases) a bit of context from DBED's own report and/or state budget analysts-who have occasionally looked askance at some of these programs.
We love people who try to make fuel out of plants
State taxpayers will cover 10 percent of "qualified research and development expenses" in "cellulosic ethanol technology"-which is alcohol from wood and grass. The max is $250,000-tiny when laid next to a
House of Cards
. It is unclear what, if any, companies took advantage of this tax credit in recent years or how much they got.
We love companies who need to do security clearance checks
Marylanders will chip in $200,000 to any business that submits "qualified security clearance administrative expenses." Presumably because the federal contracts to buy the services rendered by security-cleared individuals do not cover the cost of clearing them, rendering such contracts unprofitable without the subsidy.
The same company can draw another $200,000 of taxpayer funds to offset the cost of building a "Sensitive Compartmented Information Facility." And if your secure company is renting, yet an additional $200,000 of taxpayer funds are available during the first year to offset that cost as well. So we love us some spooky cutout NSA contractors-$600,000 a year's worth, for some reason. As with the ethanol break, information about who gets this was unavailable. Using the StateStat website, we did find one company that asked about the subsidy: NACON Consulting, LLC.
We love researchers and developers
If your business does research and development, there is a $7 million pot of taxpayer money you could tap-nearly half a
House of Cards
! You need to be "certified" by the state, then you submit your R&D expenses and you might get 3 percent back under one program or up to 10 percent if it's the other-"growth" R&D. But so many companies go for it that the actual rebate has always been less.
DBED estimates the credit created more than 6,000 jobs in 2011, the latest tax year studied. That's about $1,100 per job.
We love people who locate or expand business in poor areas*
The Enterprise Zone property tax break starts at 80 percent of the property tax owed and steps down over 10 years to 30 percent. There is also a (one time) $1,000-per-new-worker credit-with a bonus for "economically disadvantaged" employees. You can get $6,000 for hiring one of those. But wait! There's more! Within Enterprise Zones, there are super-poor "focus areas." In those, the 80 percent property tax credit continues for 10 years, the per-worker give-back is $1,500 and the credit for every "economically disadvantaged" hire is $9,000, which is probably more than you're going to pay him anyway. Baltimore City has by far the biggest investment in Enterprise Zones, topping a billion dollars per year in the past decade. For this, the businesses are projected to receive $27.4 million in 2014, which is appriximately two Netflix hits' worth of taxpayer subsidy. The total hiring credits were $10 million between 1995 and 2010.
*All of Baltimore qualifies, basically, including Harbor East, where developer John Paterakis got Enterprise Zone status for his Harbor Point project. Also, there are three "focus area" areas in Baltimore, including one just east of downtown.
We love people who relocate their business from out of state into poor areas*
The One Maryland Tax Credit is like the Enterprise Zone deal on steroids. If you invest in a "qualified distressed county," the state's taxpayers may kick back up to $5 million to fund your project's construction cost, plus another $500,000 for "start-up" costs to cover your moving expenses. The estimated amount last year was $2.2 million, and a claimed 61 new jobs were created.
*Offer good only in Baltimore City, and Allegany, Caroline, Dorchester, Somerset, Washington, and Worcester counties. Subject to change without notice. Other restrictions may apply. Stop taking One Maryland Tax Credits if you experience a serious rash or trouble breathing.
We love people who redevelop polluted land
The Brownfields Revitalization Incentive Program can get you a property tax rebate of 50 percent to 70 percent of the increased value of the site for five years after the cleanup. Some 36 projects had been so honored as of 2010.There are also state grants available to pay the cost of improving the land. About $1.9 million (one-eighth of a
House of Cards
) was disbursed in this program last year, according to DBED's annual program report, and program administrators took credit for 1,700 jobs.
We love job creators
If you create at least 25 new jobs in a qualified industry, you could get up to 5 percent back on every dollar you pay your workers. Eight companies claimed the credit in 2013, reporting 456 new jobs and $35.5 million in wages. The amount of the credit is estimated at $678,000. That's a bit under $1,500 per new job, for jobs that pay on average more than $77,000 annually.
We love biotech company owners and investors
The biotech investment tax credit lets anyone who invests at least $25,000 in a Maryland biotech firm claim 50 percent of that off their income tax, up to $250,000.
This is like requiring every state taxpayer to make a 50 percent match on any biotech investor's move, except neither the state nor its taxpayers get any equity in the deal. The program has been "oversubscribed" almost since its 2005 inception, so the funding has increased from the original $6 million per year to $10 million in 2014. In 2013, 182 investors (85 of whom were from out of state) got the taxpayer match. The state claimed 185 jobs from this last year-so it cost us $54,000 a job. State budget analysts found only 33 jobs created in 2012-$242,000 per job at the $8 million total cost. But that was better than 2011. The tax break's generosity and increased outlay helps keep leveraged private funds to a minimum, so investors don't feel too put-upon. According to DBED, "The minimum of private investment needed in fiscal 2012 is $16 million. The department reports private investment of $18.9 million."
We love cybersecurity experts
New this year: a $3 million pot of taxpayer money targeted to the computer people who will protect us from hackers (or hack us! It's all good if it's for the government!). Like the biotech credit, it goes to the investors. This one is a 33 percent refundable credit up to $250,000. Meaning if you put $750,000 into a qualified cybersecurity firm, taxpayers hand you back $250,000 of that without taking any of your equity. If you luck into the next McAfee, you're under no obligation to share your investment winnings with the state's taxpayers. DBED says the new break is just now being implemented, with eager companies and investors lining up and submitting documents.
We love wine makers
Finally (and minimally), we Maryland taxpayers love us some local vineyards. So much so that wine makers in our state can write off on their income taxes 25 percent of everything they spend on "qualified capital expenditures" for making wine. That's right! Take an extra 25 percent off all bins, barrels, filters, harvesters, mowers, hoses, irrigation equipment, labelers, vats, tools, tanks-even wire and soil! Say you're going to need 60 barrels, and they cost $150 each. Taxpayers will spot you $37.50 for each barrel, times 60, or $2,250. Your final cost: $6,750.
Unfortunately, the program is only funded at $500,000 total each year-a mere 1/30th of a
House of Cards
-so your refund may vary. Order now!
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