Bill easing taxes on in-state firms gains

Senate panel, House OK identical versions

March 24, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

Maryland manufacturers scored a victory yesterday as the House of Delegates and a key Senate committee approved identical bills shifting the burden of the corporate income tax to out-of-state companies.

The legislation will now go to the full Senate, where its passage is virtually assured after receiving the backing of the Budget and Taxation Committee. The Glendening administration supports the measure, which passed the House 130-6.

The bill was supported by many of the state's largest manufacturers - including Black & Decker Corp., Northrop Grumman Corp. and W.L. Gore & Associates.

The legislation changes the formula by which a manufacturer's taxable income is calculated. Currently, it is based on in-state sales, employment and property. The legislation would make sales the single factor on which income is taxed.

That provision drew opposition from such large nonresident companies as Kraft Foods, which have significant sales in Maryland. Their efforts were in vain because the bill was propelled by the lobbying muscle of large Maryland employers and the sponsorship of House Speaker Casper R. Taylor.

By passing such legislation, Maryland would join a growing movement among states to give their home-state companies a tax advantage. Six other states have adopted single-factor legislation, and similar bills are pending in other states.

Opponents argued that the bill would give local companies a tax windfall without requiring them to create jobs in Maryland.

But supporters said it is counterproductive for the state to base taxation on how many people a company employs and how large its facilities in Maryland are. They pointed out that Maryland companies are now paying higher corporate income taxes in states that have adopted such laws.

"The current law is a disincentive to locate or expand here. This bill is a fairly clear incentive to locate or expand," said Gene L. Burner, a lobbyist for Maryland manufacturers. "I see it as an economic development bill."

The legislation was hung up in committee for more than a month while lawmakers sought assurances that shifting the balance would not cost the state tax revenues. The bill received approval after the Comptroller's Office assured lawmakers that the change probably would result in a small increase in revenue.

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