A tax worth eliminating Improving high-tech business climate outweighs small revenue loss.

September 19, 1996

EVEN IN A COUNTY where raising sufficient revenue to fund && the annual budget is an uphill battle, Anne Arundel Executive John G. Gary's proposal to eliminate the personal property tax on research and development equipment makes sense.

The loss of local tax dollars -- less than $500,000 annually -- is peanuts compared to the benefit of retaining and attracting high-technology companies. Overall taxes collected from companies and their employees will more than offset any loss.

Reducing certain taxes -- particularly those that don't raise much revenue and are difficult to administer -- is an excellent way to improve the business climate. Companies may not be making location decisions based on this particular levy, but the tax may be enough of an annoyance that some companies may decide against locating or expanding in Maryland. No one can point to any companies that didn't locate in Maryland because of this tax, but its existence bolsters the mistaken notion that the state is hostile to business.

Last year, Gov. Parris N. Glendening, with the support of the business community, convinced the General Assembly to lower the state tax on computers and other equipment used in research and development. As a result of the state's action, a company with computer equipment assessed at $100,000 will realize an annual savings of $714.

Local governments are following the state's example. Montgomery and Howard counties, home to large numbers of high-technology businesses, have reduced their own personal property taxes on R&D equipment. Anne Arundel would join Prince George's and Worcester as counties wholly eliminating the local tax, if the council passes Mr. Gary's proposal.

The additional tax savings for a company in Anne Arundel County would amount to $1,190 per $100,000 of equipment. That would be important to large companies such as Grumman Northrop and ARINC. But the savings could be even more substantial to small firms.

Because the county's economic future lies in retaining existing high-technology companies and attracting other such firms, this tax should be eliminated. We recommend that the Anne Arundel County Council act promptly on Mr. Gary's proposal.

Pub Date: 9/19/96

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