Corporate Tax

Turn on conservative talk radio or television pundits and soon enough you'll hear that the United States has a too-high corporate tax rate that is undermining American business competitiveness and weakening the U.S. economy. This talking point is not spouted just by Republicans and anti-tax conservatives: Democrat-in-chief President Barack Obama made the same claim during his State of the Union address two weeks ago, lamenting how American companies "get hit with one of the highest tax rates in the world.

In his remarks to the Greater Baltimore Committee's annual meeting Wednesday night, T. Rowe Price Chairman Brian C. Rogers noted a contradiction in how the world sees Maryland as a place to do business. On the one hand, it is universally recognized for its top-ranked school systems and universities, skilled workforce, research activity, potential for innovation, and great quality of life. On the other, it frequently winds up toward the bottom of rankings of business competitiveness — most recently, by CEO Magazine — largely because of our tax system and regulatory environment.

An influential panel voted Tuesday to delay discussion of altering the state's corporate accounting rules, a move welcomed by the chieftains of large companies who worried that the change could hurt their bottom lines just as the economy appears to be brightening. The change, known as combined reporting, would make it difficult for companies to steer Maryland revenues to shell corporations in other states with more favorable corporate tax rates. Tightening corporate accounting rules has long offered a tempting, even populist, way for lawmakers to chip away at the state's persistent budget shortfalls.

In his recent State of the State speech, Gov. Martin O'Malley said, "Our story, Maryland's story, is the story of better choices and better results. " This is certainly the kind of high rhetorical flourish we have come to expect from state leaders during legislative session time in Annapolis. Mr. O'Malley's rosy rhetoric reminded me of another former governor who harbored presidential ambitions: Ronald Reagan, who once said, "Facts are stubborn things. " In assessing the economic health of our state, I'm inclined to focus on the facts.

Maryland's General Assembly faces another year of "difficult choices" as it takes up the governor's budget. So it's surprising to me that lawmakers don't turn more readily to what should be an easy choice: closing loopholes in the corporate income tax (CIT). Federal and state governments have faced declining corporate tax revenue for years, mainly thanks to increasingly aggressive use of legal tax avoidance techniques. At the state level, this generally means shifting income from higher- to lower-taxed jurisdictions.

Gov. Martin O'Malley told legislative leaders yesterday that he wants to close corporate tax loopholes to address the state's projected $1.5 billion budget shortfall but does not want to raise the property tax. O'Malley met with House Speaker Michael E. Busch, Senate President Thomas V. Mike Miller and others. "I expressed my desire to work hard over the next week to identify the loopholes we are committed to repairing," O'Malley said. He mentioned two ideas that have circulated in Annapolis for years: combined reporting, which forces companies to report profits from all subsidiaries as a means to prevent them from shifting income to states with lower corporate income tax rates, and closing a loophole that limited-liability companies use to avoid transfer taxes on property sales.

ANNAPOLIS -- The House of Delegates passed a bill yesterday that closes a corporate tax loophole and dedicates most of the money to school construction. A leadership priority, the bill would require corporations to pay transfer taxes and recording fees when they sell real estate. The bulk of the money raised, about $45 million a year, would go back to the counties for school construction. An amendment approved this week dedicates the state portion of the money, about $12 million annually, for land preservation.

Upset by a report that nearly half of Maryland's major corporations didn't pay income taxes last year, Gov. Martin O'Malley said he would seriously consider pushing for "combined reporting," a tax law change that advocates say would make it hard for companies to hide their profits in other states. O'Malley, a Democrat who is developing plans to close the projected $1.5 billion annual gap between state spending and revenue, said that if citizens are going to be asked to pay more taxes, businesses should pay their fair share, too. "This is an unfairness of the tax code that would allow some of the largest and most profitable corporations in the state to pay no income tax," O'Malley said.

WASHINGTON - John Kerry proposed yesterday to cut corporate tax rates as part of a plan to discourage U.S. companies from sending jobs overseas, in a speech designed to fend off charges from President Bush that he is a stereotypical tax-and-spend liberal. Speaking in Michigan, which has suffered crushing manufacturing job losses, Kerry said he would end a tax break that lets U.S. businesses avoid paying taxes on income they earn abroad. He promised that his economic program, including yesterday's proposal, would create 10 million jobs.

With incomes rising, particularly among the wealthy, Americans are paying a lot more in federal taxes than they did before the economic expansion of the last decade. Not so, American corporations. Their profits are growing even faster than personal incomes, but the taxes they pay have peaked and have begun to fall. The changes have been striking. Almost 15 cents of every dollar of income earned by Americans in 1997, the latest year for which figures are available, went to the Internal Revenue Service, up from 13 cents in 1990.

Forty-five years ago, I bought a set of electric curlers. They were made in America by Americans. They seemed expensive at that time. As it turned out, I was wrong about the price. After thousands of uses, they turned out to be a superb bargain - and then they died. As I tossed the old rollers into the trash bin, I felt like saying a eulogy to a bygone era when everyone could find a decent job, even if it were a boring, repetitive job on an assembly line, wiring a set of hair curlers for a young teenager.

I fully agree with your Oct. 25 editorial that Marylanders should vote down Question 7 on expanding gambling in Maryland, but I would add two reasons the otherwise on-target editorial ignored or paid insufficient attention to: First, major revenues from the proposed National Harbor site of a new casino would go out-of-state (with, as you correctly noted, major corporate tax breaks as well not only there but to corporate owners at other gaming sites...

As I drove by the old Playhouse cinema on 25th Street in Baltimore the other day, I thought of the hapless fellow I encountered on the screen there in the 1970s — Nino, the lead character in "Bread and Chocolate," a comedy about a poor Italian waiter who tries to make a living among the affluent of Switzerland. At one point in his degrading odyssey, Nino agrees to give his hard-earned savings to an industrialist, who promises to invest it for him. Alas, the businessman turns out to be engaged in a stock swindle, and, facing prison, he commits suicide.

You stumble upon some extra money lying around the house - some spare change behind the sofa cushions or the equivalent. You might be pleased with your unexpected good (albeit only modestly so) fortune, but you probably wouldn't be looking to spend it immediately or think it significantly changes your family finances. Yet it appears that in Annapolis, the presence of about $229.7 million more in revenue at the final close-out of the last fiscal year, which ended June 30, may actually prompt that kind of thinking.

With the selection of Paul Ryan as his running mate, Mitt Romney forces the Democrats to produce a budget of their own. It's too hot of a topic not to. They can't bury their collective heads in the sand any longer, they have to cough it up. We all know President Barack Obama doesn't like to do the figures, but now he's going to have to. This forces his hand. My tea party group is thrilled with the selection of Mr. Ryan. We love people who can crunch the numbers. Many of us now believe this election is a showdown of the Obama vision versus the Ryan vision.

It was ridiculous to read that the Maryland National Guard is being sent to Texas to patrol the border ("Md. National Guard to aid patrol of Mexican border," April 19). The only people coming over the southern border are the very poor who are desperate for some semblance of a decent life. If the Maryland Guard is in need of work, I think a better use of its members would be to go after the corporate tax cheats. For example, the guard should be arresting the CEO and the board of Wells Fargo.

At an appearance before a business group in Howard County, state Sen. Edward Kasemeyer recently made a comment that he'd like to see Maryland's corporate tax rolled back from the current 8.25 percent by one-quarter of a percentage point per year for several years. Presumably, this is so it might be made more competitive with the 6 percent corporate tax rate of neighboring Virginia and below that of other neighboring states. Mr. Kasemeyer's thoughts on this topic are not just some idle speculation by one Democratic state senator.

Seeking to boost the county's corporate tax base, Howard officials are hoping two new incentive programs will help attract new businesses and keep existing county companies from looking to move elsewhere. The county won approval from the General Assembly during the legislative session to introduce bills in the County Council to create the incentives. One measure would create a fund to provide grants or loans to businesses; the other would give tax breaks to companies hiring at least 12 full-time employees and investing in the county.

Our country and state face serious challenges. Too many people are unemployed. Gas prices are too high. And President Barack Obama is not helping to solve these problems - in fact, he's making them worse. We need only look at the records of our candidates to know who is the best person to replace President Obama. Newt Gingrich has forced big changes before by winning big debates. He's proved he can do it. As House speaker, Newt reformed welfare, lifting millions of Americans from poverty.

Annie Linskey 's recent article regarding Maryland tax revenue estimates ("State reduces estimates of 2 years' tax receipts," March 8) failed to identify a major problem draining our state of revenue - corporate tax loopholes. When large corporations abuse loopholes and skirt paying the taxes they otherwise would owe, small and mid-sized businesses are forced to shoulder the burden of higher taxes or deal with a decline in the public infrastructure and services that help businesses thrive.