Maryland House Speaker Michael E. Busch (D-Anne Arundel) and Senate President Thomas V. Mike Miller Jr. (D-Calvert) have agreed that the state needs to reduce taxes in order to compete for businesses, but they appear divided over whether the state should reduce corporate tax rates.
Both legislative leaders testified Wednesday in support of bills they proposed to provide tax relief for businesses, telling Senate and House fiscal committees that the measures will help attract and retain private-sector employers.
But Miller has proposed a bill to reduce the corporate income-tax rate from its current 8.25 percent to 7 percent. Busch has proposed no such legislation. He did not address corporate rates during his testimony, and his office did not respond to a request for comment on the matter.
The two lawmakers based their legislation on recommendations from a commission they formed in 2014 to develop tax-relief plans that could improve the state’s business environment.
The 25-member panel, headed by Lockheed Martin chairman Norman Augustine, released a report in January calling for seven changes to reduce the tax burden on businesses, including by lowering corporate rates, providing a tax break for many individuals who file their business income on personal returns, and eliminating the corporate income tax on overseas earnings that have already been taxed abroad.
Backing from Busch and Miller adds considerable weight to the push for tax relief in Maryland. Republican Gov. Larry Hogan promised during his 2014 campaign to roll back some of the tax hikes enacted by his Demotic predecessor, Martin O’Malley, but he achieved only modest victories on that front in the past year — mainly through toll reductions, lower taxes for military retirees and a repeal of the so-called rain tax.
The governor has said he plans to sign any legislation that comes from the Augustine report. “We support any true tax cut that gives money back to Marylanders,” Hogan spokesman Doug Mayer said Wednesday.
Miller acknowledged that passing his eight bills could be a challenge in Maryland’s Democrat-controlled legislature, but he encouraged lawmakers to work at it.
“I know it’s going to be a tough sell, but just do the very best you can to move our state forward,” he said during a joint hearing with the House Ways and Means and Senate Budget and Taxation committees.
Unlike Miller, Busch has not introduced bills to reduce the corporate tax rate or the estate tax. But he said the state needs to “start to chip away at some of the things that can make the business climate better in Maryland.”
One of the proposals the two lawmakers have in common would allow individuals to exempt the first $20,000 of their business income from taxation.
Another, which Busch pointed to as a priority during his testimony, would allow multistate corporations to base their tax rates on their sales in Maryland, rather than on sales, property and payroll in the state.
The Augustine commission said that switching to the “single sales” method would create an incentive for companies to move to the state or remain in it, since many would face a lower tax burden.
Legislative analysts have said the change would have little to no impact on state revenues, but they added that the effects on businesses would vary depending upon how each entity operates.
Busch and Miller have also sponsored bills to expand a tax credit for the working poor, something the Augustine group has said would spur economic activity and ultimately boost tax evenues. Hogan has proposed similar legislation.
Benjamin Orr, executive director of the liberal-leaning Maryland Center on Economic Policy, warned lawmakers that tax cuts for businesses could negatively impact public investments such as education and transit spending.
“Businesses in Maryland already get a great return on investment with the value of the services they receive,” he said.