Comeback Kid

December 19, 2004|By C. Fraser Smith

SOMETIMES YOU think he's lost a step or three. Sometimes, as if he had nothing else to do, he stirs up a furor: a near-international incident, for example, over Hispanic fast-food servers whose English doesn't meet his exacting standards.

If you're a Democrat, you may think he's mean to the little people and too cozy with the rich and famous, including Gov. Robert L. Ehrlich Jr., a Republican.

And then Comptroller William Donald Schaefer reminds you that he's a solid public servant. His makeover of Baltimore goes on speaking for itself. And just when he seems determined to put himself on the ropes, he and his staff (he always has a superb staff) come up with a beauty.

In the last few weeks, Mr. Schaefer pulled off a $200 million coup for the state treasury. It should give any potential 2006 challenger, Democrat or Republican, something to think about. Could they still say he's washed up? If some people had listened to him, the Christmas bonus he delivered could have been at least $306 million, maybe more.

His successful pursuit of deadbeat corporations turned up the big money. Taking advantage of a loophole in the Maryland tax system, many corporations have been able - legally, but irresponsibly - to avoid paying taxes on money made in Maryland. They transferred corporate earnings to offices in Delaware, which, according to the Maryland courts, were no more than mail drops. Shell corporations, in other words.

Mr. Schaefer and his trusty bean-counters had forced the issue, taking a few of these corporations to court. No one really knew the extent of the thinly veiled heist, but they found out: $200 million at least. The court ruling was limited, but it made the comptroller a threat to other businesses that might have been nailed for back taxes, penalties and interest charges.

The full extent of exposure was reduced - over the comptroller's stern objection. Mr. Ehrlich declined to veto legislation that would have held corporations liable for more than they ultimately paid under an amnesty. Mr. Schaefer opposed the bill because it spared the offending corporations any tax liability. Had Mr. Ehrlich vetoed the legislation, Mr. Schaefer would have been able to collect another $100 million.

So, Mr. and Mrs. Voter, the comptroller will be reminding you that some important state services could be missing - or your taxes might be higher - if he hadn't stuck to his loophole-filling guns.

His victory has political ramifications beyond his own improved re-election prospects. Some Democrats, unhappy with him for various reasons - including his support for Governor Ehrlich - might have thought him vulnerable to a primary challenge. They were probably wrong even before his recent win over the big, bad corporations. And if he continues to oppose the governor, they may welcome him back to the fold.

From the Democrats' viewpoint, the split highlights Mr. Ehrlich's too-rigid stance on taxes. Mr. Schaefer's win might be a tad embarrassing for the governor. Was he protecting the businessmen when he vetoed the heavier penalties? Why wouldn't he want to close loopholes for the rich and famous? Maybe he thought businesses should not be punished for taking advantage of a law that virtually invited them to hide their profits. Accept that argument or not, Mr. Schaefer wins on the grounds of fairness and by virtue of the $200 million.

Mr. Ehrlich can't afford to lose Mr. Schaefer's support on the three-member Board of Public Works. That body handles the state's business, and the Republican governor needs one vote other than his own to get anything done. Treasurer Nancy K. Kopp, a Democrat, is a less-reliable partner.

New confrontations over corporate taxes may be inevitable. Tax lawyers apparently search for the soft spots or create them every day. It's their job. And one of the comptroller's experts says a bill under consideration by the Ehrlich administration would reduce corporate tax liability to that ideal number: zero.

So, Mr. Comptroller, the voters who pay their taxes say thank you for the $200 million, but they have a question:

What have you done for us lately?

C. Fraser Smith is news director for WYPR-FM. His column appears Sundays.

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