Business groups gird for session
Chambers, others wary of new tax proposals for 2010 Assembly
Maryland business executives are bracing for the almost inevitable program cuts and tax increase proposals as legislators prepare for next week's opening of the 2010 General Assembly session.
With the state facing a budget deficit of up to $2 billion, the buzz phrase among business leaders is "prudent fiscal management."
"We need to grow the tax base by attracting new high-paying jobs, not by raising taxes," said Lisa Fadden, vice president of public affairs for the Montgomery County Chamber of Commerce. "We aren't necessarily advocating reduced spending in specific areas, but spending in general needs to be sustainable."
A bill to implement a new tax method for certain businesses referred to as "combined reporting" already has been pre-filed by Del. Roger Manno (D-Dist. 19) of Silver Spring. The measure would require companies that operate in numerous states to total their combined profits from all entities and then pay a portion to Maryland based on factors such as how much property, payroll and revenues were reported in the state. The proposal has been defeated several times in recent years.
Proponents say the measure is designed to close a loophole that allows multistate corporations to avoid paying taxes by transferring profits to out-of-state subsidiaries, while opponents say it will add to the cost of doing business in the state during continued lean economic times.
The Maryland Chamber of Commerce, Montgomery chamber and Greater Baltimore Committee are among the business groups that want legislators to wait on considering combined reporting until the Maryland Business Tax Reform Commission completes its evaluation of state corporate tax policies. The commission is slated to issue an interim report by Dec. 15.
"It's wise to let that group do its work and report back with recommendations," said Ronald Wineholt, vice president of government affairs for the Maryland chamber.
Even state Comptroller Peter V.R. Franchot (D), who has supported the measure, recently said now is not a good time to make the change due to the continued effects of the recession on businesses.
Manno's bill would also retain a higher state tax rate on individuals making more than $1 million, which is set to expire soon, to help strengthen teacher and state employees' pensions, among other uses. The state chamber also opposes that proposal.
The 2010 election year will likely cause support for new tax proposals to be minimal, Fadden said. But with that election out of the way and federal stimulus funds likely to be used up by 2011, Montgomery chamber officials are preparing members for a more tax-happy session in 2011.
"We are trying to make sure our members have a thorough understanding and can advocate effectively next year," Fadden said.
Supports rise in gas tax
To help fund transportation improvements and other programs, the state chamber supports increasing the gasoline tax up to 7 cents as long as the Transportation Trust Fund is not raided to help finance the general fund. The group has supported raising the tax in the past, though legislators have shied away from doing that.
"We recognize that at some point, we will need additional revenues for our road system, or that system will continue to be degraded," Wineholt said.
The Montgomery chamber also wants to see transfers from the transportation fund curtailed, plus legislative support for projects such as the Metro Purple Line between Bethesda and New Carrollton, the Red Line extension to as far as Frederick, turn lanes along Route 355 and the widening of Interstate 270.
The Montgomery chamber is also advocating for a small amount of state pension funds to be invested in local technology start-ups and a continued high level of investment in public schools and universities.
"We are bringing legislators from both Montgomery and Prince George's counties together to focus on future transportation funding," Fadden said.
The Tech Council of Maryland is calling on lawmakers to double funding of the biotech investment tax credit to $12 million. The popular program among biotechs allows investors a 50 percent credit against state income taxes.
The $6 million in the program has been exhausted within hours on the first day in recent years. Last year, some biotechs had representatives wait in line for as long as five days to secure the credits.
The importance of the information technology and biotech industries to Maryland's economy dictates increased support for such programs, said Renée Winsky, CEO of the council.
"Advanced industries like information technology and biotechnology are part of the solution for Maryland to emerge strongly from its economic challenges," Winsky said.
The tech council is also lobbying against the re-emergence of the computer services sales tax proposal, which was rolled back two years ago before it was even enacted.
The Greater Baltimore Committee also wants to see an increase in the research and development tax credit cap, the extension of funding for heritage structure tax credits and support for the Red Line from western Baltimore County to southeast Baltimore.
While many are quick to support rail lines, legislators should consider building another bridge across the Chesapeake Bay, which would help the Eastern Shore's tourism industry, among others, said state Sen. E.J. Pipkin (R-Dist. 36) of Stevensville.
"The Bay Bridge is a major inconvenience for people throughout Maryland who must use it as a route to Ocean City, which depends on tourist dollars," Pipkin said.
Medical insurance again figures to be prominent in legislators' discussions this session, which starts Wednesday, with Congress possibly adopting federal changes. Employers need to remain in control of the process, Wineholt said.
The implementation of any federal reforms should be carried out to promote competition and minimize additional employer burdens, he said.
Support for association insurance plans, which allow groups to negotiate lower premiums, is among the legislative priorities of the Greater Bethesda-Chevy Chase Chamber of Commerce.
Unemployment insurance proposal
Gov. Martin O'Malley (D) has proposed using federal money to beef up the ailing unemployment insurance trust fund, to provide $83 million in immediate rate relief to employers.
But that proposal would result in more people collecting for longer periods with increased eligibility and perhaps higher benefit amounts, said Ronald Adler, CEO of Potomac human resources consulting firm Laurdan Associates and the Maryland chamber's representative on the General Assembly's Joint Committee on Unemployment Insurance Oversight. The Maryland Retailers Association and Maryland chapter of the National Federation of Independent Business also oppose the measure.
With more unemployed people seeking benefits, the trust fund has dwindled from about $895 million in late September 2008 to $220 million in November. Weekly benefits payments peaked at $24 million last March and were about $18 million a week in September.
O'Malley's plan would also allow employers to spread out payments over a longer time frame, which business officials applaud.
Because the ratio of the money in the trust fund to the total taxable wages in the state is below 3 percent, Maryland businesses face higher unemployment insurance tax rates this year. Minimum-rated employers who have not laid off employees in the past three years will see their rates increase from $51 per employee to $187 per employee, although O'Malley's proposal would drop that to $153 per employee.
The Maryland chamber also plans to oppose legislation that would provide for tort liability based on comparative fault, market share liability or weakened standards in the awarding of punitive damages.
Business meetings related to 2010 General Assembly
*Maryland Chamber of Commerce Business Day: 8 a.m., Jan. 15, Governor Calvert House, Annapolis, 410-269-0642, firstname.lastname@example.org.
*Tech Council of Maryland Leadership Dinner: 6 p.m.-9 p.m., Jan. 20, Loews Annapolis Hotel, 240-243-4026, email@example.com.
*Greater Baltimore Committee General Assembly Legislative Forum: 8 a.m.-9:30 a.m., Jan. 25, Sheraton Baltimore City Center Hotel, 410-727-2820, firstname.lastname@example.org.
General Assembly Resources
*Maryland General Assembly, look up information on bills filed at mlis.state.md.us/#bill
*Chamber Action Network, an alliance of Maryland chambers of commerce following state bills and their impact on businesses, 410-269-0642, www.chamberactionnetwork.com.
*Maryland Chamber of Commerce position on bills, www.mdchamber.org/legislative/bills/index.asp.