- The Washington Times - Saturday, September 22, 2007

BALTIMORE — On his third day as a traveling salesman, Maryland Gov. Martin O’Malley said yesterday the state needs to close corporate tax loopholes that let big businesses avoid taxes that families and small businesses must pay.

The O’Malley administration estimated that the state could gain about $40 million a year by addressing “controlling interest” and “combined reporting” tax loopholes. Local governments stood to gain $55 million a year by closing the controlling interest loophole, administration spokesman Rick Abbruzzese said.

In combined reporting, corporations avoid state taxes by moving profits to subsidiaries in other states. The controlling interest loophole enables corporations to skip transfer taxes and real estate recordation taxes, or 2 percent of sales prices paid by residents and small businesses.

The governor has been releasing details this week of his sweeping plan to close a looming $1.7 billion deficit, using various locales across the state as backdrops.

His latest pitch came from the roof of a downtown Baltimore building. With a sweeping view of various corporate headquarters on one side and homes on the other, the Democratic governor used the sale of the 30-story Alex Brown Building as an example of how state coffers can get shortchanged. The governor pointed out that a Philadelphia-based company sold the building last year to an out-of-state company for $120 million and avoided an estimated $2.4 million in city and state transfer and recordation taxes.

“If one of these houses around us had sold for, say, $200,000, that homeowner would have paid $4,000 in their local transfer tax, but a big building, because of this corporate loophole, can sell for $120 million and not pay a single dime,” Mr. O’Malley said. “That’s not fair and that’s not right.”

Mr. O’Malley referred to a recent study that found that half of the 150 largest corporations in Maryland pay “absolutely nothing in corporate income tax.” He said the state needs to “do a better job of making sure that all of us who depend upon our quality of life in our state are also contributing towards its defense.”

Maryland Republicans have criticized Mr. O’Malley’s tax plan, saying the state wouldn’t need to raise taxes if Democrats would stop spending so much money. A coalition of business groups released a report Thursday saying the proposals could harm the business climate and send thousands of jobs out of state in coming years.

Ronald Wineholt, vice president of government affairs for the Maryland Chamber of Commerce, said he worried the corporate tax proposals would scare away businesses by increasing the cost of commercial real estate transactions.

“We’re waiting to see the full package, but we have some concerns with what we’ve seen so far,” Mr. Wineholt said.

But the governor said Maryland fared well in a national ranking of states with the best business climates conducted by Forbes magazine. Mr. O’Malley also said the changes he is proposing keep Maryland competitive with other states in the Mid-Atlantic region.

Mr. O’Malley already has proposed changing the state’s income tax structure and increasing the sales tax by 1 cent, from 5 cents on the dollar to 6 cents. He plans to have more announcements next week about tax proposals, including an announcement Monday relating to the state’s corporate income tax rate. Other considerations include raising the tobacco tax from $1 a pack to $2 a pack, and the introduction of slot machine gambling.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide