The news that a complex tax law change known as "combined reporting" could have resulted in $170 million in additional payments from businesses into Maryland's coffers if it had been in effect in 2006 is bound to reignite a familiar debate in Annapolis next year, with progressive groups on one side and the Chamber of Commerce on the other.
The two sides have been duking it out over this issue for years, with proponents of combined reporting insisting it ensures that businesses pay their fair share and are unable to hide profits in other states, and opponents saying it would be a logistical nightmare. Adding fuel to the fire, Maryland is in the midst of a deep budget crisis. As much as $2 billion may have to be cut from the budget next year, with the effects likely to hit government workers and those who depend on state services. Meanwhile, the state is struggling to emerge from the recession, and the chamber is already staking out the position that combined reporting would hurt businesses when they're most vulnerable.
The preliminary report from Comptroller Peter Franchot's office to the Maryland Business Tax Reform Commission does provide sufficient grounds to keep the debate over combined reporting alive. But the way the debate is being framed is the wrong way to look at the issue. It's not a matter of whether Maryland can score some quick cash to help with its budget problems on the backs of faceless, interstate corporations, and it's not a matter of whether the General Assembly is anti-business. It's a matter of designing a corporate tax structure that's fairer and that makes the state less susceptible to wild rises and falls in revenue with each change in the economy.
The $170 million figure comes from an analysis of 2006 tax data. That's not a huge number in the context of a $13 billion budget, but it is a fairly big swing in the corporate tax, which at the time was about $790 million a year.
Does that make combined reporting "anti-business"? Not exactly. The report found that combined reporting produced winners and losers in the business community. About half of the businesses in the state would have paid less under combined reporting rules, and the heaviest burden would have fallen on the largest companies. That's what makes the chamber's reflexive opposition so peculiar; though a handful of big companies would pay more, many others would benefit. It would seem that Maryland's small-business owners would have as big a stake in exploring this idea as progressive groups and labor unions do.
