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Augustine panel urges Maryland corporate income tax cut

A commission established by Democratic leaders in the Maryland General Assembly is recommending significant changes to the state's tax structure, including cuts to the corporate income tax and other levies affecting companies.

A draft of the panel's final report, obtained by The Baltimore Sun, shows that the group headed by former Lockheed Martin chief Norman R. Augustine will call for cutting the corporate income tax from 8.25 percent to 7 percent over three years.

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The commission's report has been widely anticipated in Annapolis. The panel was established through legislation pushed by Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, both Democrats. It is expected to have a significant — though not necessarily decisive — influence on the tax decisions Republican Gov. Larry Hogan and the legislature are expected to make this year.

The report pays homage to the Republican desire to cut taxes and the Democratic goal of protecting money for schools.

"The challenge for Maryland is to reduce the $18 billion annual tax burden borne by its citizens and businesses ... without substantively harming critical services provided by the state," the draft report says. "As will be seen, among the most important of these services, insofar as the future strength of the economy is concerned, is its educational system."

Hogan has said that if legislative leaders propose a corporate tax cut in response to the Augustine report, he would support it. While he has spelled out general plans for tax cuts, he has not released specifics for all his proposals.

One change the commission endorsed appears to track with one of Hogan's tax proposals — to accelerate a phased-in increase in the Earned Income Tax Credit, an income tax refund that primarily benefits lower-income working families.

Another panel recommendation that could affect more companies than the corporate tax is to lower the personal income tax on mostly small businesses that pass that liability to their owners. Without giving specific numbers, the report calls for income tax exemptions for some partners in such business. The recommendation is in line with the top priority of the Maryland Chamber of Commerce.

Among its other proposals, the commission will recommend:

•That the state reject "combined reporting" — a way of computing corporate taxes that shifts more of the burden to large multistate corporations.

•That Maryland this year exempt the same amount as the federal government (nearly $6 million) when collecting estate tax. An increase to that level is currently being phased in through 2019.

•That the legislature routinely evaluate whether tax credits it has adopted are accomplishing their aims. The report calls for sunset provisions under which such credits will automatically expire, unless renewed.

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