The Daily Record: The midsession business report from Annapolis

Editor’s note: The following commentary appeared on on February 21, 2019.

It is the midway point for the annual 90-day session of the Maryland General Assembly, and with that milestone a number of pressing business and employment related issues have emerged as topics of spirited discussion among state legislators.

Here is a look at the status of pending legislative proposals as we head into the home stretch of this year’s legislative session:

Minimum wage

Legislation proposing that Maryland raise its minimum wage to $15 per hour has been hotly debated and grabbed plenty of headlines. It appears a bill in some form will likely pass the General Assembly, but Gov. Larry Hogan has signaled he may veto such a move. He has expressed concerns that the higher minimum wage would result in businesses leaving the state, resulting in job losses.

The business community is somewhat split on the issue. Some vehemently oppose it. The Greater Baltimore Committee has indicated support for the legislation contingent on the passage of several amendments, including preventing jurisdictions from enacting legislation to raise the minimum wage higher than that set by the state, exempting seasonal and youth employment, and providing small and midsize businesses a longer period to meet the new wage requirement.

As we head deeper into the session, this issue will continue and will likely result in different House and Senate versions headed to a conference committee to be resolved before sine die.

Opportunity Zones

There are several legislative proposals simmering in the General Assembly aimed at bolstering Opportunity Zones. Opportunity Zones were created under the federal tax law enacted in 2017 and are meant to encourage investment capital in communities struggling economically by providing investors with tax relief on capital gains. There are 149 such zones – 42 in Baltimore City alone.

Hogan has submitted a plan to beef up incentives in Opportunity Zones by allocating $56.5 million to support economic development and business creation. The GBC and other business organizations support proposals to expand incentives for investors as these are likely to encourage economic activity that will lead to jobs and benefit affected communities.

With the governor supporting this issue and the potential benefits for communities clear, some of the proposed legislation on this issue seems to have the legs to make it into law this year.

Corporate tax rate

A number of proposed bills to incrementally lower Maryland’s corporate income tax rate, currently at 8.25 percent, have been submitted. This is not a new issue; trimming the corporate tax rate has been a topic of debate for years. The concept has strong support from the business community, as several neighboring states have lower rates, including Virginia (6 percent).

The GBC and business leaders contend that reducing Maryland’s corporate tax rate would result in a number of benefits, including long-term economic growth, improved business competitiveness and stronger entrepreneurship, investment and productivity. It’s not clear at this point if the legislation has enough support in the General Assembly to make it into law.

Combined reporting

Proposed legislation that would require Maryland corporations to use combined reporting for corporate income taxes has earned the ire of a number of business groups. Under combined reporting, companies with subsidiaries in different states would need to account for those subsidiaries when filing their income taxes in Maryland.

While some states require combined reporting, neighboring states, such as Virginia, do not. As a result, some have raised concerns that businesses in Maryland may flee to those states. While that is speculative, it is clear that combined reporting would add another headache to business operations and hinder, rather than help, the state’s business climate.

It’s not clear how far this legislation will get. But it’s doubtful the governor, who stands by his “Maryland is Open for Business” slogan, will allow it to become law.

Public-private partnerships

A number of legislative proposals are being advanced that would alter the state’s policy on what are known as public-private partnerships (P3s). Such partnerships are considered useful in deploying private capital for critical state infrastructure improvements, particularly in the area of transportation.

When used properly, P3s allow state government to leverage opportunities for economic growth and job creation. Maryland established its P3 policy in 2013 and it has been generally recognized as providing a fair, predictable and transparent platform for P3 projects.

Most of the proposals before state legislators could expand the time frame for approval of P3 projects. The certainty and predictability of the current process works well for the state and the private sector.

It’s still too early to tell where these proposals are headed, but they are sure to be watched carefully by the business community statewide and it will be interesting to observe how the governor’s administration handles them.

Donald C. Fry is President and CEO of the Greater Baltimore Committee. He is a frequent contributor to The Daily Record.

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