At Ehrlich event, businesses say they are crippled by state policies
Progressive Maryland says large corporations skipping out on tax responsibilities
ANNAPOLIS To a group of business owners, state tax increases are crippling the ability to grow and hire more people.
"What has gone our way in the last three or four years? Really not much," said Gary Amoth, who owns Hard Bean Coffee in Annapolis.
Amoth and more than a dozen other business owners met with former Gov. Robert L. Ehrlich Jr. (R) on Thursday to talk about how the recession and state policies are drawing money away from their bottom lines.
The same day as procrastinating taxpayers raced to finish their 1040s the labor-backed organization Progressive Maryland suggested that the state's problem stems from too many large companies shifting their profits out of Maryland and avoiding state taxes.
Matthew Weinstein, the group's fiscal policy director, said the state should change its accounting rules to force companies to pay more in state taxes.
Ehrlich listened as business owners including a uniform supplier, two manufacturers, a contractor, a jeweler and a woman who operates Annapolis tour boats described the burden of recent state policies.
The 2007 increase in the sales tax has sent more customers to Delaware, said Del. Ronald A. George (R-Dist. 30) of Arnold, who operates Ron George Jewelers.
Several business owners told horror stories on unemployment benefits. Rates recently have shot up, as the trust fund that pays benefits has been reduced.
But not only have rates gone up, business owners reported more strenuous enforcement.
Brian Gill of Gill Grilling said he tried to fire an employee for drinking on the job, but faced grilling of his own by state investigators. He had three attorneys on retainer, he said.
Amoth said the burdens of taxes and unemployment mean that he has hired nine or 10 fewer people for his coffee shop near the Annapolis City Dock. Normally, he would have 28 to 30 employees.
Ehrlich has pledged that if he wins in November he will roll back a sales tax increase passed during Gov. Martin O'Malley's term. In November 2007, O'Malley (D) called the General Assembly into session to pass a portfolio of tax increases, including a 20 percent hike in the sales tax from 5 percent to 6 percent.
In meeting with reporters, Ehrlich did not offer potential budget cuts to offset the loss in revenue.
"I'm not necessarily buying into the predicate that it has to be paid for," Ehrlich said. "I don't buy into the idea that when you tax a good or service at a higher level you're going to get more dollars because typically you're going to get less dollars."
He said the millionaire's tax, a levy on higher incomes also approved in 2007 and set to sunset this year, cost the state $257 million even though it was supposed to produce $160 million.
Ehrlich met at The Rockfish, an Annapolis restaurant owned by Del. James J. King (R-Dist. 33A) of Gambrills. A few blocks away, Progressive Maryland was touting statistics provided by the Comptroller's Office that showed one-third of the state's largest companies did not pay taxes in 2007.
The comptroller's data show that in 2007, out of 87 of the state's largest companies, 58 or two-thirds paid taxes.
The data do not name which individual companies paid and which did not.
Weinstein said the figures prove the need for "combined reporting." Maryland allows each subsidiary of a company to file its own taxes. Critics claim this allows multistate corporations to shift profits into low-tax states and expenses into Maryland.
Under combined reporting, all of a company's revenues and expenses would be collected into a single return, apportioning what would be appropriate for Maryland.
A March letter from David Roose, director of the state Bureau of Revenue Estimates, projected that if the state had combined reporting in 2006, it would have netted $144 million.
"The state will use [that money] to restore the funding for education, health care, infrastructure and Chesapeake Bay funding that was cut from the Maryland budget because the money wasn't there, because these guys aren't paying," Weinstein said.
Herbert H. McMillan, president of the Maryland Tax Association and a former legislator, said another tax on business would hurt the private sector and raise prices for consumers.
"You can't pass a bill that says you can't raise prices when you raise a tax. When they do, the left will have a point. Right now, they don't," he said.