- The Washington Times - Monday, January 19, 2004

Maryland Gov. Robert L. Ehrlich Jr. is developing plans for more financial incentives to bring high-tech industry to the state.

Mr. Ehrlich is scheduled to submit the annual budget to the General Assembly tomorrow.

His advisers would not confirm whether the financial incentives would be included in the budget.

Even if the governor’s proposals fail to win General Assembly approval this year, they represent a framework for his economic development plans, the advisers said.

Maryland’s technology industry ranks among the top for states, including more than 200 major research labs and government investment in university research that supports 50,000 jobs.

Mr. Ehrlich created a committee, called the Governor’s Commission on the Development of Advanced Technology Business, to help him develop plans for financial incentives to draw more high-tech companies to Maryland.

Last week, the commission recommended that high-tech investors get a 50 percent tax break on capital gains from early-stage companies and a 10 percent tax credit, up to $25,000, for investing in technology companies. The companies could get sales-tax exemptions on building supplies.

The commission also said that state pension funds should be invested in private equity and high-tech venture capital to reap a larger return.

“My administration is unapologetically pro-business, and their work will help us make Maryland a newly competitive business environment,” Mr. Ehrlich said about the commission’s report.

Commission Chairman George Pappas, a Baltimore patent attorney, said the proposals are “designed and recommended to make us competitive so when companies are trying to determine where to locate, we are as attractive and competitive as our sister states.”

However, General Assembly members who tend the budget wonder how the program would be funded.

The governor’s commission does not explain clearly the costs of the proposals or how they would be funded.

As a result, winning the support Mr. Ehrlich needs for approval of his high-tech development plan is speculative while the state’s $22 billion budget suffers from a nearly $800 million deficit.

Even some of Mr. Ehrlich’s fellow Republicans in the General Assembly say more tax incentives might cut too deeply into the budget.

“Already there are many incentives given to businesses,” said Delegate Jean B. Cryor, the ranking Republican on the House Ways and Means Committee.

Among them, Maryland gives biotechnology companies a tax abatement for locating or expanding within economically distressed areas, a research and development tax credit, and a tax credit for creating at least 25 jobs. In addition, a state financing authority can help businesses secure financing.

Regarding additional tax credits, Mrs. Cryor said, “If you want to give these tax credits, would you mind showing me what you want to take out of the budget to pay for it?”

She also said investing pension money in venture capital creates too much risk of financial loss.

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