Editorial: Going after tax giveaways

Buried beneath a pile of tax increases and spending cuts in Gov. Martin O’Malley’s proposed budget that are already attracting lightning bolts from all sides is a small but important victory for Maryland taxpayers — if the General Assembly has the courage to go through with it.

The governor wants to kill the sales tax exemption for sales of precious coins and bullion worth more than $1,000.

That tax break, which costs the state an estimated $1.25 million a year, was featured prominently last month in an article by Daily Record reporter Nicholas Sohr about Maryland’s 341 tax giveaways that divert billions from the state’s coffers every year with little, if any, oversight.

Those tax preferences are financial incentives for various businesses that are supposed to boost the economy by doing things like giving credits to utilities if they buy coal mined in Maryland and to businesses that operate snow-making machinery and making it cheaper to install solar-powered water heaters.

But in most cases, the state doesn’t know how well the tax breaks work. And even in this age of austerity, the state isn’t sure how much 157 of them cost.

Here’s one thing we do know about these tax breaks, however:

“They’re the ultimate trophy for corporate lobbyists,” said Greg LeRoy, executive director of Good Jobs First, a Washington nonprofit that analyzes state economic development incentives, in an interview with Mr. Sohr.

“Tax expenditures have become a lot more popular because corporate lobbyists have figured out [tax expenditures] are easier ways to get subsidies from the taxpayers,” LeRoy explained. “They kick the can down the road in terms of the harm they do to the budget. The costs associated with them fall on the next governor, the next legislature.”

This particular form of taxpayer largesse began in 1990 when a currency and precious-metals trading firm named Deak International, just emerging from bankruptcy, promised to bring as many as five offices, 20 employees and annual operating expenses of at least $1 million to Maryland if lawmakers approved the tax break. State economic development officials lobbied for the giveaway and it passed.

Deak was sold twice soon thereafter and the promised offices, employees and spending never came. But the tax break has remained on the books, and the Whitman Coin and Collectibles Expo now appears in Baltimore three times a year.

Last session, Del. Dana M. Stein, D-Baltimore County, tried to kill the coin and bullion tax exemption on his own. But he ran into a buzz saw of opposition from coin collectors, a lobbyist hired by Whitman, Baltimore delegates and Mayor Stephanie Rawlings-Blake.

The bill died in committee.

This year’s pushback began Thursday when the general manager of Whitman Coins and Collectibles Expo LLC threatened to move the three annual coin shows from Baltimore to another state in reaction to the governor’s proposal to eliminate the tax break.

Forget the threats and histrionics. It’s time for our elected leaders to take a hard look at this and the other 340 tax breaks to see which ones are working for both businesses and taxpayers and which ones are working only for the businesses they are benefitting.

Gov. O’Malley has taken an excellent first step. Now the legislature needs to follow.