Failure to Close Tax Loopholes Harms Maryland Businesses

We are disappointed that the Maryland General Assembly did not take action to close corporate tax loopholes during the special session.

The companies who avoid paying taxes cared intensely about preserving these loopholes – so much so that they targeted “combined reporting” more than tax increases. After all, if you don’t have to pay taxes, it doesn’t matter what the tax rate is.

Influencial lobbyists and public relations firms managed to convince lawmakers that a well-established policy to simplify taxes was an unproven and overly complicated measure. They presented “combined reporting” as draining too much revenue from businesses that would be required to pay and as not producing enough revenue to be significant. And they successfully peddled a misleading report from Ernst & Young, a consulting company whose business it is to sell tax avoidance schemes that would be eliminated by the reform.

Corporate tax loopholes will likely gape even wider in coming years as a result of this special session. When lawmakers raised the corporate income tax rate by 1 percent but failed to close loopholes, they gave multi-state companies even more incentive to transfer profits out-of-state.

As a result, Maryland’s tax system will be less fair and individuals and in-state businesses will have to carry the burden. When we face the tough choices ahead, let us not forget that one reason for the funding gap is the scores of companies that were given the pass to continue avoiding paying their fair share of taxes.