As state lawmakers look for new tax revenues to fill a fiscal hole, the largest corporations doing business in Maryland are not paying their fair share, a state senator said.
In addition, nearly half of the 132 biggest companies paying no taxes in 2005, according to figures supplied by the comptroller?s office.
“By using loopholes, shelters and other gimmicks, these big companies are avoiding paying Maryland taxes,” said Sen. Paul Pinsky, D-Prince George?s. “Mid-size Maryland businesses are at a disadvantage” because they can?t use the same techniques.
Maryland corporate income tax receipts were down 8.4 percent this past year to $590 million, Comptroller Peter Franchot said in his July report on tax collections. The corporate tax ? 7 percent on net income in Maryland ? has been a declining source of state and federal revenues, despite higher profits.
Pinsky is pushing the same solution he has three previous years without success ? changing an accounting method know as combined reporting. It forces corporations to consider all subsidiaries as a single unit in figuring how much income comes from Maryland.
Not surprisingly, the Maryland business community opposes, although Baltimore?s only remaining Fortune 500 company, Constellation Energy, favored most aspects of the bill this year.
There is also a major dispute about how much money the measure would raise, with Pinsky disputing as too low estimates by a legislative analyst that the measure would raise only $25 million to $50 million.
The Maryland Chamber of Commerce produced scenarios under which the state could lose money when unprofitable divisions appear in corporate totals.
Combined reporting “is time-consuming and costly for businesses to administer,” said William Burns of the Chamber. Implementing it “would place the state at a huge competitive disadvantage,” he said. “The corporate income tax represents a small part of the total state and local tax burden imposed on Maryland employers.”
The Maryland Bankers Association, the Tech Council and the Montgomery County Chamber have agreed.
Only 17 states now use combined reporting, none on the East Coast.
Written testimony from Constellation Energy said that Maryland is currently out of step on corporate taxes, and combined reporting would bring the state into conformity with federal rules.
Gov. Martin O?Malley has not commented on Pinsky?s proposal.
