I support these efforts, but I am also focused on a long-overdue policy change that would benefit small businesses — as they recover from the pandemic and for years to come.
At issue are two major loopholes in our corporate tax system in Maryland. Together, they allow many large, profitable businesses to drastically reduce or eliminate their share of state tax.
The Maryland comptroller’s office has documented that in any given year, about one-third of the 150 biggest corporations doing business in the state pay nothing in state corporate taxes. These large businesses use clever accounting to exploit the state tax code and drive down their tax obligations.
Maryland’s small businesses — the print shops, the manufacturers, coffee shops, independent bookstores, restaurants and so many more — simply can’t take advantage of these kinds of loopholes. They pay a fair share in state taxes, confident that they are supporting the services they and their customers rely on.
The Corporate Tax Fairness Act of 2021, which I’ve introduced, would close these enormous loopholes that give an unfair advantage to the big firms. It would require big multistate businesses to file their taxes using “combined reporting,” which just means that all parts of a company, including subsidiaries, are considered when determining how much of a company’s profits are generated in Maryland. This eliminates the ability of companies to shift funds on paper to out-of-state subsidiaries to artificially reduce their Maryland taxes.
My primary goal with this legislation is to make sure that these large companies pay their fair share in Maryland taxes. This ensures that smaller companies — without access to these loopholes — are on an equal competitive footing.
I’ve been proposing this bill for several years, and Maryland has lost needed revenue by failing to act. The Maryland Center on Economic Policy estimates that our state could have raised an additional $515 million in revenue between fiscal years 2014 and 2018 by taking these steps.
All businesses should pay their fair share to support the public services that allow them to make profits — whether it’s the schools that educate their employees’ kids, the roads they take to get to work, the parks they visit or so many other crucial public amenities.
Maryland will also need additional revenue down the road to fund our landmark education reform plan and address issues such as climate change and the wide health disparities based on race and geography. Closing these tax loopholes will generate significant new revenue that will help us deal with these urgent needs — and do it in a way that makes our economy more competitive.
The public understands the importance of this kind of legislation. A full 79 percent of Maryland voters support closing these loopholes, according to polling conducted recently by a leading Maryland survey firm.
We made progress last year, as the House of Delegates, by wide margins, passed legislation to close these tax loopholes — only to have the legislative session end early because of the pandemic.
This is the year to finish the work. No matter how you feel about the state’s role in providing services or the right size of state government, we all should agree that, at a bare minimum, our tax system should provide fairness to everybody — individuals and businesses. Giant businesses and many wealthy individuals are gaming the tax code to pay little to no taxes.
It’s time we stood up for tax fairness.