Douglas F. Gansler, a leading Democratic hopeful for Maryland governor, said Thursday that he wants to cut the state’s corporate income tax rate to the same level as Virginia’s, embracing a cause that has been pushed primarily by Republicans.
Gansler, Maryland’s attorney general, said that reducing the rate from 8.25 percent to 6 percent would help the state compete for jobs against Virginia, which he has repeatedly characterized as more aggressive and business-friendly than Maryland.
“They’ve figured out how to it on the economic front,” Gansler said during a Silver Spring event to promote his ideas on a largely unrelated topic: the health and financial well-being of the state’s senior citizens.
Nonpartisan analysts have projected that similar plans introduced in recent years in the Maryland General Assembly would have cost the state more than $300 million a year in lost revenue. On Thursday, Lt. Gov. Anthony G. Brown, Gansler’s leading rival for the 2014 Democratic nomination, said Gansler owed voters an explanation of how he would pay for his plan and still balance the budget.
“If the Attorney General wants to cut $1.6 billion in revenue over the next five years, then he has a responsibility to explain how he would pay for it,” Brown said in a statement. “Would he cut investments in our public schools, defund Obamacare or scrap the Purple Line or other much needed transportation projects to balance the budget?”
Gansler did not elaborate on his idea and declined to take questions after the event.
Doug Thornell, a Gansler campaign strategist, said the corporate tax proposal will be detailed in a broader economic plan that will be released after Gansler officially declares his candidacy for governor next month.
“One of those ideas he will be looking at is a targeted reduction in Maryland’s extremely high business tax rate to help generate growth and make Maryland more competitive in attracting new businesses and jobs,” Thornell said. “He will do so in a way that protects the middle class and programs and services Marylanders rely on.”
Thornell declined to say whether Gansler would propose an immediate cut in the rate from 8.25 percent to 6 percent or a gradual reduction over several years, as some recent bills have done.
Maryland’s corporate income tax rate was raised from 7 percent to 8.25 percent in 2007 as part of a package of revenue measures introduced by Gov. Martin O’Malley (D) in his first year in office to close a budget gap.
Maryland’s rate puts it in the middle of the pack among the region’s states and the District. The rates are higher in Pennsylvania (9.99 percent), the District (9.975 percent) and Delaware (8.7 percent). They are lower in Virginia (6 percent) and West Virginia (7 percent).
In recent years, Virginia has won some high-profile battles to lure businesses, including defense giant Northrop Grumman’s headquarters in 2010, and there has been a growing push in Maryland to lower the corporate tax rate. Some Republicans who have sponsored bills argue that the loss in revenue could easily be absorbed by a general fund budget of more than $15 billion. Some corporate income tax revenue flows into a separate fund used to finance transportation projects in Maryland.
Del. Ronald A. George (R-Anne Arundel), among the declared Republican candidates in next year’s race for governor, introduced an unsuccessful bill this year that would have gradually lowered the rate to 6.75 percent. George said Thursday that he plans to try again during the session that starts in January and that the new legislation would lower the rate to 5.75 percent, less than in Virginia.
A spokesman for Harford County Executive David R. Craig (R), another Republican candidate for governor, said he would go even further, knocking Maryland’s rate down to 4 percent, among the lowest in the nation.
“In our view, the time for timid, half-measures is over,” said Craig spokesman Jim Pettit. “We need to send a loud, clear message that Maryland is open for business that reverberates across the country.”
Although Republicans have introduced most of the bills seeking to lower the corporate income tax rate in recent years, the idea has gained some traction among Democrats, who control both chambers of the Maryland legislature.
Del. Heather R. Mizeur (D-Mongtomery), a third Democrat in the governor’s race, said that there should be discussion about improving the business climate in Maryland but that cutting the corporate rate to 6 percent would be “pushing the limits of what is possible.”
“A better approach is to close loopholes used as a tax-avoidance strategy by a handful of giant corporations,” Mizeur said.
Sen. Edward J. Kasemeyer (D-Baltimore County), chairman of the Budget and Taxation Committee, said there is probably a consensus among committee members that a reduction in the rate would be desirable, though not as low as 6 percent.
Kasemeyer said the state’s budget challenges, as well as resistance from O’Malley and the legislature’s presiding officers, have stood in the way of a corporate tax reduction in recent years.