In what could be the first blow to Gov. Martin O?Malley?s deficit solution, senators on Saturday said they would not likely heed his call to change a tax system that proponents say allows corporations to avoid paying millions in income taxes.
Estimated to generate $27 million, the proposal known as combined reporting does not have enough votes to pass the Budget and Taxation Committee, Chairman Ulysses Currie said.Members appear to favor establishing a commission to study the state?s business tax structure over the next several years.
“I don?t think we have the votes on this committee to do combined reporting ? in fact, I know we don?t,” said Currie, a Prince George?s County Democrat. “Rather than kill the governor?s bill, we thought we would look at, as staff said, doing some more work.”
O?Malley urged legislators to close the combined reporting “loophole,” that he and liberal Democrats charge have allowed nearly half of the state?s for-profit corporations to avoid paying income taxes by shifting profits to out-of-state subsidiaries. Combined reporting is used in a number of western states, and tax experts testified Thursday that it was the fairest way to tax corporations.
The Maryland Chamber of Commerce and other business groups paid for an Ernst & Young economic study that said combined reporting was the most damaging of O?Malley?s tax proposals. These include increasing the sales, tobacco and titling tax rates in addition to income taxes for the state?s wealthiest residents.
The House has passed similar combined reporting measures during past sessions, only to see them die in the Senate.
Sen. Nancy King, a Montgomery County Democrat, has introduced legislation creating a 3-year study. Currie said he would favor a shorter study. Joseph Bryce, O?Malley?s chief legislative officer, suggested the committee at least consider an interim tax during the study period.
Democratic Sen. Edward Kasemeyer, a Baltimore County Democrat, dismissed the idea.
“I just don?t see the logic of putting something into effect for two, three years and then find out in a study it?s not what we should be doing,” Kasemeyer said.
