Mr. Ehrlich's giveaway

October 06, 2004

IT'S DIFFICULT to stomach the news that Gov. Robert L. Ehrlich Jr. is contemplating a $55 million tax break for out-of-state corporations. This is the same governor who wants to reduce state employee health benefits and has left safety-net agencies perilously underfunded. These are lean times for state government, Mr. Ehrlich often reminds us, and yet he wants to "gut" a law that prevents big companies from avoiding their fair share of taxes.

Who says it's an evisceration? That's the view of none other than Comptroller William Donald Schaefer, who seems to have only recently noticed that Mr. Ehrlich has some brutal budget-balancing plans for state agencies. And he's right: The proposal would reopen the Delaware loophole (named after the accommodating state where dummy holding companies are often set up to funnel profits). The comptroller also calls it "dreadful tax policy" and has promised to "fight this one."

Well, good for you, Mr. Schaefer, and welcome back to consciousness. The comptroller has spent much of the last two years serving as Mr. Ehrlich's cheerleader and most reliable vote on the Board of Public Works. He was strangely silent this spring when Mr. Ehrlich signed legislation releasing these same companies from a combined $88 million in unpaid back taxes.

Experts differ on whether Maryland's loophole-closing law is causing some unintended adverse consequences. The comptroller's staff believes firmly that there aren't any significant problems; the Maryland Chamber of Commerce thinks otherwise. But for the administration to suggest that the law has made "Maryland the least desirable location in the country to set up or operate a multistate corporation" seems an outright canard.

Before the lobbyists hyperventilate further, perhaps a review of the facts is in order. Maryland's 7 percent corporate tax is among the lowest in the nation. The state's sales tax (particularly its exemptions for manufacturing and research) and property tax rates compare favorably, too.

Mr. Ehrlich would be wise to reconsider any $55 million giveaways to big corporations right now. He's already awakened an angry comptroller. Surely he can't want voters to catch on, too.

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