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State leaders home in on tax relief: What proposals will Hogan, Democrats agree on?

Amanda Yeager
Contact Reporterayeager@capgaznews.com

In a session punctuated by partisan skirmishes, Gov. Larry Hogan and the General Assembly's Democratic leaders have at least one thing on which they generally agree: tax relief.

Hogan, Senate President Thomas V. Mike Miller Jr. and House Speaker Michael E. Busch have all introduced legislation this year to lower taxes on individuals and businesses in Maryland.

But that leaves a big question: Just what will the legislature approve?

Some of the proposals overlap — such as speeding up an increase in income tax credits for low-paid workers. Others present diverging views on where to focus relief.

The Hogan administration has said it broadly supports lower taxes for Marylanders, but the governor has not commented specifically on the Democrats' legislation.

Still, "the planets today would seem to be aligned," Norman Augustine, the former CEO of Lockheed Martin and chairman of the so-called Augustine commission, told lawmakers at a hearing last week.

"The governor and legislative leadership have been heavily focused on competitiveness and creating jobs. We shouldn't waste this opportunity."

Hogan introduced his $480 million tax relief plan in mid-January, right before the start of session. The proposal would provide tax credits to seniors, working families and manufacturers looking to move into the state, and slash statutory and business filing fees to the tune of more than $250 million.

At the press conference at which he announced the plan, Hogan said an overwhelming majority of Marylanders support his suggestions.

"I can't imagine any member of the legislature of any party possibly having a problem with providing tax relief to retirees on fixed incomes, struggling working families or struggling small businesses," he said.

Miller, D-Calvert, and Busch, D-Annapolis, have based their priorities on the recommendations of the Augustine commission, formally called the Maryland Economic Development & Business Climate Commission — a group of legislators and business people appointed by the two General Assembly leaders.

The panel spent the last two years looking into ways to improve the state's business climate and competitiveness.

One of Miller's priorities is to cut the corporate income tax rate from 8.25 percent to 7 percent. He pointed to competition from Virginia, which has a 6 percent rate. But he cautioned that tax cuts shouldn't come at the expense of funding for schools and infrastructure improvements.

Busch said that "the one thing that we all agreed upon is you can't jeopardize our public education system."

He favors using a single sales factor for Maryland corporations; a way of streamlining tax collection so that companies pay corporate income taxes only on their in-state sales, instead of on the traditional three taxable categories of sales, payroll and property.

Manufacturers in Maryland are already taxed using the single sales factor, but Busch said he'd like to expand the tool to more businesses to give companies an incentive to locate their headquarters here. He predicted the switch could be revenue-neutral if done properly.

Benjamin Orr, executive director of the Maryland Center on Economic Policy, considered to have a liberal outlook, took a more cautious approach to talk of corporate tax cuts.

"If Maryland were to reduce its corporate tax rate, were to switch to a single sales factor or if the state were to adopt the governor's proposal to exempt manufacturers (from property taxes), that's a tremendous hit to the state budget and programs and services that, frankly, business relies on in many ways, that all of us rely on," Orr said.

Orr takes exception to the characterization of Maryland as a state unfriendly to business. The state's educated workforce, high-ranking schools and transportation infrastructure are major draws, he said.

"If we starve the state of resources, we will be forced to either make significant cuts to those economic supports, or we will be forced to raise everyone else's taxes" to maintain them.

But Orr lauded proposals to accelerate an increase of the earned income tax credit, which sends money back to households earning less than $53,000 a year. Hogan's office estimated the measure would help 170,000 families across the state.

"That has a much larger positive impact, not only on low-income workers who are struggling to make ends meet but also on Maryland's economy," Orr said.

Christopher Summers, who runs the Maryland Public Policy Institute, a think tank that tends toward libertarianism, called raising the earned income tax credit an "immediate boost in the arm" to the state's economy.

He believes reducing individual income taxes should be part of an across-the-board tax relief policy that includes corporations and small businesses. "Maryland does not have a revenue problem, it has a spending problem," Summers said.

He called the corporate income tax rate "one of the most daunting obstacles to economic growth right now in the state."

Summers was less keen on the idea of a single sales factor, which he predicted would lead to a laundry list of carve-out requests from big corporations who do business in the state but have their headquarters elsewhere.

"It's going to help some (companies), and obviously it's going to hurt some large employers in the state," he said. "What do you do?"

Despite backing by Democratic leaders, Summers is skeptical about the chances of corporate income tax reductions passing in a General Assembly with a Democratic majority. "I think it still remains to be seen whether the majority of the legislature view that we have a taxing problem," he said.

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