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R. Michael Gill, Secretary of Department of Business and Economic Development. (The Daily Record / Bryan Sears)
R. Michael Gill, Secretary of Department of Business and Economic Development. (The Daily Record / Bryan Sears)

Gill predicts corporate tax relief; analysts say that’s not the problem

Maryland’s newly minted Commerce secretary says he believes the General Assembly will consider reducing corporate income taxes in the state when it reconvenes early next year.

Michael Gill’s comments last week to a breakfast meeting hosted by the Tech Council of Maryland came a week after a legislative commission heard from economists with Moody’s Analytics who said the idea that corporate taxes were too high was more fiction than fact.

“For those of you that have businesses, if we can get that 8.25 down to something less, and it puts a little bit more money in the business, you’ll re-invest it,” Gill said last week. “Government kind of looks at this stuff like, ‘hey, we can’t trust them, they’re probably going to go buy a new boat if we let ‘em keep that extra half a point.’ So I really do believe that there’ll be legislation put forward looking at the taxes and where we can make improvements.”

 

Dan White, an economist for Moody’s Analytics, said that Maryland’s corporate tax rate may not be the problem at all.

“Contrary to popular belief, Maryland stacks up very well,” White told the Maryland Economic Development and Business Climate Commission during an Oct. 2 meeting. The Moody’s report was produced at the request of the commission.

His comments were part of a presentation on a 60-page report about the state’s tax climate and other costs of doing business in Maryland.

The commission, formed by House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr., is charged with coming up with recommendations related to taxes in the state. The commission’s report is due by the end of the year and is expected to result in legislation in 2016.

Maryland has a corporate tax rate of 8.25 percent — third among its peer group, which Moody’s defined as including Georgia, Massachusetts, North Carolina New Jersey, Pennsylvania and Virginia.

As a percentage of gross state product, Maryland’s rate is .29 percent. Only North Carolina, Georgia and Virginia are lower, according to the Moody’s report.

“Corporate income taxes, especially when you combine the lowest level, are very low,” White said. “Especially when you compare them with the peer group and the USA (average).”

White said the bigger issue is personal income taxes.

“Where Maryland really does stand out is that large reliance on other taxes,” White said. “Total personal income taxes — it’s the third highest burden in the U.S.”

Residents in Maryland pay 3.5  cents in combined state and local personal income taxes for every dollar earned — higher than the national average of 2.1 cents and the 2.5 cents on average paid by the state’s peer group, according to the report.

White said that is likely to have a bigger effect on small businesses in Maryland.

“Those who are sole proprietors, people who have very small businesses, they’re not paying the corporate income tax,” White said. “They’re paying the personal income tax. So for smaller businesses and startups, sometimes that personal income tax can be just as important if not more important.”

Business reporter Daniel Leaderman contributed to this report.

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