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Annapolis – Business leaders from across the state are calling for closing of tax loopholes in support of Gov. O’Malley’s announcement to close tax loopholes as part of the larger budget proposal.
Challenging the myth that closing the tax loopholes would be bad for the economy, Maryland-owned businesses called for an end to tax-avoidance practices allowed by our current tax code in Maryland.
“It’s outrageous that big corporations aren’t paying their share while our schools are struggling to provide textbooks for all the kids, and our roads and bridges are crumbling around us,” said Mark Cook, proprietor of Cook Networking, an IT company based in College Park. “Asking big business to pay the same taxes we pay is not only fair, but makes good business sense for the economy.”
According to the Comptroller of Maryland, 64 of the 132 largest for-profit corporations in Maryland don’t pay any state income taxes.
Last week, Gov. O’Malley proposed “combined reporting” as a comprehensive solution to corporate tax loopholes. Combined reporting would require corporations with subsidiaries or affiliates to file a single tax return that lists all of the conglomerate’s business activity, rather than treating each subsidiary as a separate entity. Under combined reporting, companies would no longer be able to shift money between subsidiaries to veil profits and avoid paying taxes in a particular state.
“Businesses are good based on what they do—not based on taxes,” said Keith Losoya, Executive Director of the Chesapeake Sustainable Business Alliance. “Businesses are good because of good leadership, a good product, and a good workforce — not tax breaks. Those who believe otherwise are naive or have never run a company. Hard-working Maryland businesses deserve a level playing field and we urge legislators to support Gov. O’Malley’s proposal to close corporate tax loopholes.” The Chesapeake Sustainable Business Alliance is an association of more than 100 local Maryland businesses.
“This really is an issue of fairness,” said Johanna Neumann, policy advocate for Maryland PIRG.
Opponents of combined reporting trumpet a statistic from an Ernst and Young study commissioned by the Chamber of Commerce purportedly showing that 18.3 jobs would be lost for every $1 million dollars of revenue gained by combined reporting. However, the study assumes the increased revenue will not be reinvested into the economy. In fact, Federal Highway Administration studies show that their spending on public transportation yields 47.5 jobs for every additional million dollars. Thus, based on the Ernst & Young study, using revenue from combined reporting to enhance public transportation would actually create a net effect of about 20 jobs in Maryland for every million dollars.
“Businesses that avoid taxes by using accounting tricks have a strong interest in stopping the Governor’s plan to close tax loopholes,” said Neumann. “Legislators should take a closer look before believing misleading statistics provided by consultants for those who seek to maintain the status quo.”
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