Taylor backing tax change

The intent is to help manufacturers that employ Marylanders

Battle lines shaping up

January 06, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

Manufacturers with plants in Maryland have picked up powerful support for an effort to change the state's corporate income tax so they would pay less while out-of-state companies with sales here would pay more.

Speaker Casper R. Taylor Jr. said yesterday that the House Democratic leadership will throw its weight behind legislation that would save millions of dollars for manufacturers that employ large numbers of Maryland workers.

"The idea in this is to help Maryland business," the speaker said. The Cumberland Democrat said he would discuss details of the legislation when the House leadership agenda package is unveiled Monday.

The legislation could touch off a bruising struggle among corporations involving many of the most prominent lobbyists in Annapolis.

Dennis McCoy, lobbyist for Kraft Foods, said he expects substantial opposition from consumer goods companies.

"Given the fact that the legislation affects the pocketbook of virtually every business that does business in Maryland, I would expect there to be a lot of discussion," he said.

Advocates said the bill would change the formula under which a manufacturing company's income tax liability is computed so that it would be based solely on its percentage of sales in Maryland. Maryland imposes a 7 percent income tax on a company's income in the state. Currently, the formula for determining income takes into account a company's payroll and property in the state as well as sales. Advocates of the change say that system penalizes companies that locate headquarters and factories here. "It's more of an economic-development bill than it is a tax bill," said Gene Burner, who will lobby for the bill on behalf of a coalition of large Maryland manufacturers.

The legislation would directly benefit such large Maryland employers as Black & Decker Corp., Northrop-Grumman Corp., McCormick & Co. Inc. and Mack Trucks, Burner said.

Under the legislation, which has not yet been drafted, manufacturing companies with heavy sales here but few employees would see their tax bills increase. Examples Burner noted included Philip Morris Cos. Inc., parent of Kraft Foods, and Caterpillar Corp.

Burner, who represents the newly formed Maryland Manufacturers Council, said he anticipates success because the bill would provide significant benefits to companies with strong ties in Maryland while imposing modest increases on a larger group of out-of-state firms. "What leverage do they have?" Burner said. "Given that, I don't see massive opposition."

But McCoy said the issue isn't as simple as it seems because the change would invite retaliatory taxation by other states.

"You may end up putting it in one pocket and taking even more out of another pocket," he said.

Burner said the bill would follow a trend that has seen several large states peg their corporate income taxes to sales alone. He said that in New York, Gov. George E. Pataki has made a similar move part of his legislative agenda.

"It'll save Maryland companies some money; it'll also offset some extra money they're going to pay into New York," Burner said.

He added that the bill will be tailored to affect only manufacturing companies in order to defuse potential opposition from retailers, telecommunications companies and others that might pay more under a broader bill.

But Tom Saquella, president of the Maryland Retail Merchants Association, said his group will still oppose the bill.

"If you do it for the manufacturers, you're eventually going to do it for all business," he said. Saquella said the formula discriminates against retailers because their sales will always outweigh their payroll and property.

Saquella called the bill divisive. "It's sort of the business community hanging out its dirty laundry," he said.

The bill is not part of the Maryland Chamber of Commerce's legislative agenda, though the group has been involved in discussions of the bill.

Kathleen Snyder, president of the Maryland Chamber of Commerce, said her organization will review it once its has a draft of the legislation.

"Everybody needs to see something in writing. The devil's in the details," she said.

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