Md. manufacturers gain, retailers lose in income tax bill passed by Senate

March 17, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS -- Companies with most of their property and people in Maryland, but few of their sales, got a break yesterday from the Maryland Senate, which voted to change the way corporate income taxes are calculated.

The change, approved 46-1 last night, would give a company's sales within Maryland greater weight in the formula used to calculate state income taxes.

That means that manufacturers such as Black & Decker Corp. and McCormick & Co. would pay less in state income tax under Senate Bill 384 than national retailers, such as Sears and K mart.

A similar version of the Senate bill is awaiting a vote in the House Ways and Means Committee.

But with 16 of the 24 committee members as co-sponsors of the bill, even its opponents recognize the measure as a done deal in this, its third year before the General Assembly.

"It's Maryland's version of the Great Train Robbery," Thomas Saquella, executive director of the Maryland Retail Merchants Association, said last night after the bill was passed.

"Without real economic justification it will cause mostly manufacturers based in Maryland to get a tax break," Mr. Saquella said, "and it's going to fall to retailers to make up the difference."

The state Department of Fiscal Services estimates that the change would produce an extra $1.5 million in corporate income taxes in fiscal 1993.

Currently Maryland's corporate income tax is based on three equally weighted factors: the value of property, payroll and sales in the state. The legislation would double the weight given to the sales factor, so that companies that have higher sales in Maryland would pay more taxes than those with relatively more property and personnel.

Mr. Saquella said the change could mean 5 percent to 10 percent higher state taxes for major multistate retailers. He said those companies already pay 66 percent of all corporate income taxes paid in Maryland.

But 21 other states already have changed to a "double-weighted sales tax" formula.

At the House hearing, the state Department of Economic and Employment Development, the Maryland Chamber of Commerce, and several manufacturers testified in favor of the bill.

The legislation "will reward companies like Black & Decker with a substantial share of their payroll and property in Maryland and who have created jobs, strengthened the tax base and improved the quality of life in our state," Towson-based Black & Decker Corp. said in written testimony to the Ways and Means Committee.

The retail merchants warned, however, that "if you double-weight [the sales factor] this year, somebody will raise the ante by going 'triple weight.' Where do you draw the line?"

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