Businesses beef, but Md. tax collector is kind to them

February 18, 2004|By JAY HANCOCK

BUSINESSES, as Ricky said to Lucy, you got some splainin' to do.

You keep beefing about taxes, but you contribute less to state and local taxes in Maryland, in percentage terms, than in any other state in the country.

You can look it up. Prompted by claims that business doesn't pay its fair share, the Council on State Taxation hired a consultant to analyze business taxes across the nation. The study came out last month.

In Maryland, business' share of state and local taxes was 32 percent, the least in any state. In Pennsylvania, business pays 40 percent of state and local taxes. In Virginia, 37 percent.

In North Carolina, that commercial Eden often yearned for by Maryland executives, businesses dish out 36 percent of the tax revenue. And you don't want to hear about West Virginia, where businesses contribute 48 percent of the state and local levies.

We're talking about virtually all business taxes, not just the corporate income tax. A year ago people were complaining about how little money was raised by the corporate income tax, and commercial leaders correctly noted that businesses pay tons of additional taxes.

Well, this study looks at the caboodle: excise taxes, license fees, gross receipts taxes, payroll taxes, property taxes, income taxes and more. Based on fiscal 2003 data, it's the first comprehensive analysis I've seen on business' tax share at the state and local level.

And it wasn't done by Ralph Nader, either.

The Council on State Taxation is financed by 550 large corporations. The report's aim was to show that business accounts for big portions of state and local tax collections, and it proves its point. Nationally, businesses paid more than $400 billion in state and local taxes in fiscal 2003, 43 percent of the total.

But the study also shows that business pulls more weight in some states than others. Maryland companies, you don't look so impressive.

You do have excuses. Relatively speaking, business doesn't own as big a piece of Maryland's $200 billion economy as it does of other states' economies. When business is a smaller part of the tax base it's not going to contribute as much in tax revenue - even if rates are high.

Only 81 percent of Maryland's workers are employed by private companies, vs. 83 percent nationally. Why? Maryland has more government jobs - especially federal jobs - than other states its size. One of our chief industries is importing tax dollars from Iowans and Oregonians and lavishing them on federal bureaucrats. But Maryland also ranks pretty low when business-tax contributions are measured other ways.

We're 35th in state and local business taxes paid per private-sector employee, according to the Council on State Taxation study. We're 41st in business taxes as a portion of the private-sector economy. And we're 43rd when you hold business taxes up against income generated by state-based capital.

Joseph Crosby, legislative director for the Council on State Taxation, notes that wealthy, East Coast states such as Maryland tend to record smaller portions of business-tax contributions because their fat personal incomes generate high personal-tax collections.

"Maryland is one of the wealthiest states in the country, much like Connecticut, which also scores fairly low in most measures of business taxes as a result," he said. "You can actually look at different regions and see that they have fairly similar tax systems."

OK, but Connecticut ranked higher than Maryland in business-tax contribution every way Crosby's group measured it.

Kathleen T. Snyder, head of the Maryland Chamber of Commerce, points out that the Council on State Taxation study did not measure millions in small-business taxes that are filed and paid on personal income tax schedules.

"Maryland is a small-business state," she said, noting that only a little more than 3,000 of the state's 148,000 companies have 100 or more workers. "When people start talking about, `Are these big corporations paying their fair share?' well, look at the kind of companies we have here."

Yeah, but small businesses outnumber big ones in any state, though Pradeep Ganguly, chief economist for the state Department of Business and Economic Development, says the percentage of small companies in Maryland is "somewhat higher" than the national average. The new study is not the last word on business contribution to the public weal. But it makes it harder for Maryland companies to complain about being overtaxed. Read it online at www.statetax.org.

Correction: Sunday's column said Comcast bought AT&T's cable unit in 2001. The deal was announced in 2001 but closed in 2002.

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