Tax reform would say Md. is ‘closed for business’
In a recent column The Baltimore Sun’s Dan Rodricks advocated that Maryland adopt combined tax reporting, arguing that it would close loopholes and generate hundreds of millions in new revenue (“Dan Rodricks: Maryland legislators need to close a tax loophole that protects corporate profits,” Feb. 16).
However, as the leading voice for over 6,800 businesses across Maryland, the Maryland Chamber of Commerce has serious concerns regarding this complex policy.
In a recent report on the state of Maryland’s economy comptroller Brooke Lierman delivered a sobering message that Maryland’s economic growth effectively stalled in
2017 and has remained stagnant ever since, even as regional competitors surge ahead.
Budget deficits now loom, leaving schools, health care programs and infrastructure underfunded and policymakers scrambling to bridge the gaps.
Even more alarming, though, is what our state’s economic stagnation signals — a lack of competitiveness in attracting the very job creators, investment and growth essential for strengthening Maryland’s economy. This critical juncture demands strategic solutions prioritizing job growth, business investment and economic expansion to make our state competitive on the regional and national stage.
Although some policymakers and advocates tout combined reporting as a strategic solution and “loophole closing,” it is a complex tax policy that shifts tax burdens between industries without raising net revenue over the long run.
Ranking among the most volatile tax policies, combined reporting would import profit gains from other states in some years, but in other years, especially during economic downturns when state funds are needed most, it imports losses from other states.
Two Maryland commissions — the Business Tax Reform Commission in 2010 and the Economic Development Commission in 2016 — thoroughly studied combined reporting and unequivocally rejected it, warning it would significantly redistribute the tax burden among industries without raising net revenue.
While Rodricks argues that businesses will not flee our state due to combined reporting, this complex policy does threaten to stymie business investment and job growth to address Maryland’s budget problems.
Our neighbors, including Virginia, have declined to adopt combined reporting due to its potential damage to the business climate. Similarly, Pennsylvania, Delaware, North Carolina, Tennessee, Georgia and Florida are among the 22 other states that have also chosen not to adopt combined reporting.
Notably, these states outrank Maryland in both CNBC’s annual “Top States for Business” rankings and U.S. News and World Report’s most recent “Best States for Business” rankings. It is also noteworthy that none of the states across our nation has mandated the “worldwide combined reporting” currently under consideration in Maryland.
Any short-term revenue gains from combined reporting, if realized, would be vastly outweighed by long-term harm to Maryland’s ability to attract job creators, fuel innovation and grow our economy. Instead of resorting to tax schemes that could undermine economic growth and competitiveness, Maryland must embrace policies that position it as the nation’s most pro-business state — welcoming job creators and removing barriers to expansion and tax base growth.
Rather than pursuing combined reporting, Maryland should remain laser-focused on streamlining regulations, improving competitiveness and extending the welcome mat for business investment and growth.
Gov. Wes Moore’s vision for Maryland as the most pro-business state with a welcoming investment climate should guide us. Embracing combined reporting sends the opposite message — that Maryland is closed for business.