Editor’s note: The following commentary appeared on CenterMaryland.org on February 3, 2016.
By Donald C. Fry
For years Maryland has struggled to shake off the reputation that it’s an “anti-business” state, a reputation largely born from cries in some corners that businesses suffer from overregulation and onerous tax policies.
Maryland has any number of great assets, including a robust entrepreneurial culture and top global companies, so there’s plenty of room to argue the facts don’t support that reputation. But like it or not, perception is often reality.
Fortunately, during the early going of the 2016 Maryland General Assembly session that got underway last month some of the stars seem to be lining up to help shake off this “anti-business” label.
Worth noting first, perhaps, are recommendations to reform some of Maryland’s corporate and business tax policies, contained in a report prepared by the Maryland Economic Development and Business Climate Commission. The appointed panel, which includes elected state officials of both political parties, is often referred to as the Augustine Commission for its chair, former Lockheed Martin executive Norman Augustine.
According to a published report in The Baltimore Sun, which obtained a copy of the draft of the final report, some of the proposed reforms could include:
- Reducing the corporate income tax rate from 8.25 percent to 7 percent over three years.
- Reducing the tax burden paid by what are known as “pass-through” business entities. This reform would largely affect small businesses, of which there are many in the state.
- Rejecting passage of legislation requiring “combined reporting,” a taxing policy which would negatively affect corporations.
The Greater Baltimore Committee (GBC), among other business organizations, has long advocated for the legislature to reform the state’s tax structure. In fact, it’s one of the GBC’s top legislative priorities again this year. Doing so, the GBC notes, would help ensure Maryland’s tax system is fair and the business climate competitive.
In its 2013 report, “A Compact for Competitiveness Report: Developing Shared Strategies for Maryland Competiveness,” the GBC found that CEOs universally cited making Maryland’s tax structure more competitive and fair as the top priority.
The state’s tax system, the GBC report noted, “is the ‘elephant in the room’ in any discussion of Maryland’s business competitiveness and detracts from the state’s many significant strengths as a business location.”
Among the tax reforms business executives cited in the GBC report as having strong potential to remove impediments to business development and thus improve the business climate: Reduce the tax burden on “pass-through” business entities.
While it remains to be seen whether this reform is ultimately adopted by Maryland legislature, it’s encouraging that the commission’s recommendations are in alignment with many of the tax reforms that have been advocated for years by business leaders.
Governor Larry Hogan is due to give his State of the State speech today to the Maryland General Assembly. With a year of governing and learning about the inner workings of Annapolis it is worth watching to see if mentions support for new business tax reforms to make Maryland more competitive.
He’s already announced several proposals to boost business, such as a tax incentive to draw manufacturers to three areas of the state where unemployment remains higher than the state average: Baltimore, Western Maryland and the lower Eastern Shore.
The Republican governor and former businessman has been vocal since he took office last year that he wants his administration to do all that it can to make Maryland much more amenable to businesses and their needs as a way to drive economic growth and jobs while improving the business climate and reputation. One of his first orders of business after taking office was launching a new state slogan to promote a fresh approach: Maryland – Open For Business.
All of this came as welcome news to the business community, job seekers and many others. A year has passed and now the governor’s words and plans need to come into alignment with those of legislative leaders so real progress can be made beyond the slogan.
Hopefully leaders in both legislative chambers this year will find enough common ground to support proposals to reform the state’s tax structure and give Maryland that needed competitive edge.
Indeed with the imprint of the Augustine Commission on any such proposals and a governor that campaigned for these reforms at the helm, this seems like a golden opportunity to make real progress on this front.
Tax reform, in and of itself, is not the cure all for what ails the state’s business reputation. Regulatory reform and improved customer service are among the additional areas that need to be addressed to improve Maryland’s competitiveness.
But taking action on tax reform this legislative session would be a powerful first step and a send a strong signal to the business community in and out of the state that Maryland is serious when it says it is “open for business” and the stars are indeed coming into alignment to shake off the “anti-business” badge Maryland has worn for far too long.
Don Fry is President and CEO of the Greater Baltimore Committee and a regular contributor to Center Maryland.