The Maryland Business Tax Reform Commission voted overwhelmingly on November 16 to urge state lawmakers not to enact a combined reporting corporate income tax policy during the 2011 session.
The recommendation, which was introduced by commission member Delegate Kumar Barve (D-Montgomery) who is House majority leader, sends a signal that legislative leaders may not be in a mood to increase business taxes in the 2011 session.
The Greater Baltimore Committee and other business advocates contend that a combined reporting tax policy would not make Maryland’s corporate taxes more “fair,” as proponents contend, but would instead make them more complex and volatile, would increase business costs, and would make Maryland less competitive as a business location. Thanks to Steven J. Banks, of T. Rowe Price, who represented the GBC on the commission.
Three of the five lawmakers on the tax reform commission — Barve, Senator Nancy J. King (D-Montgomery) and Delegate Sheila Hixson (D-Montgomery), who chairs the House Ways and Means Committee — voted for the motion to recommend not to implement combined reporting next year. Senator Richard S. Madaleno, Jr. (D-Montgomery) and Senator Verna Jones (D-Baltimore City) voted against Barve’s motion.
The commission’s vote does not mean that there won’t be a combined reporting bill proposed in the session that begins on January 12. It’s likely that such a bill will be filed and pushed by proponents as a way to help close a projected $1.6 billion budget deficit. But at least proponents won’t be able to tout an endorsement from the tax reform commission that spent two years studying the policy that, for Maryland tax purposes, would take into account the entire earnings of Maryland companies with operations in other states.
The commission’s recommendation is silent on whether combined reporting legislation should, in its opinion, be considered in future legislative sessions.
The commission also voted to adopt a recommendation urging the state’s Department of Business and Economic Development to create a work group to evaluate the relevance and effectiveness of Maryland’s business tax incentives.
The commission staff will draft a report, expected to be available in December, that discusses tax policy and business incentive issues studied by the panel since it was created by the 2007 General Assembly special session. The commission will meet on December 7 to review the draft report.