Three Key Maryland Democrats Open to Cut Corporate Tax Rate

Three Maryland Democratic legislators are open to reducing Maryland’s corporate income tax.
According to Maryland Reporter, House Ways and Means Committee chair, Sheila Hixson, Senate Budget and Taxation Committee chair Ed Kasemeyer, and Senate Majority Leader Rob Garagiola all stated, at a Maryland Chamber of Commerce business policy conference last week, they are open to reducing Maryland’s 8.25 percent corporate income tax rate. 

Later in a legislative panel with Del. Sheila Hixson and Sens. Edward Kasemeyer and Rob Garagiola, the three lawmakers agreed that lowering the corporate tax would be in the best interest of the state.

 Hixson, a Montgomery County Democrat and chair of the House Ways and Means Committee, said that a decrease has not been considered in any of the House’s tax plans.

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 “I would be happy to work with Ed to see if we can get together with the House and Senate and certainly go forward with hearings and getting what kind of fiscal impact it has,” Hixson said. “Sometimes in the state legislature we get accused of not being business friendly, but there is a sense that we want everybody working together in this point in time to help you.”

 Kasemeyer, a Howard County Democrat and chair of the Senate Budget and Taxation Committee, proposed cutting one quarter of one percent per year until “the impact wouldn’t be so significant every year.”

 “I think it would be for the better of Maryland if we could reduce it,” Kasemeyer said. “From a perception basis, the 8.25% rate makes us look out of line. We get around $750 million from the corporate income tax.”

 Although Garagiola, Senate majority leader, said that Maryland does rely too heavily on federal jobs, the state has taken action to diversify its economy in recent years.

“There are a number of things that we put in place, the research and development tax credit, to try to foster and grow other industries,” he said. “Biotech, high tech, even greentech. It’s one of the fastest growing sectors in our state. There were a lot of jobs created in that sector even during the recession.”

 “We got to react to what they do at the federal level,” Garagiola added.

Economist Anirban Basu told conference goers that if Maryland is going to weather cuts in federal spending, and regain competitive footing with Virginia, it needs to improve its dismal business tax climate. 
All three legislators voted to increase the tax from 7 percent to 8.25 percent during the 2007 special legislative session that increased taxes by $1.4 billion.
While it is a positive development that these three Democrats signaled their willingness to cut the corporate tax, getting an actual reduction will be a politically tough sell.  Maryland Democrats campaign on, and derive a great deal of support from their main constituencies on their ability and willingness to raise taxes. 
The “biotech, high tech, and even greentech” tax credits Garagiola touted may make a great sound bite they are merely evidence of government picking winners and losers.  Politically favored industries get tax breaks while other non-favored industries and small businesses are left out in the cold.
Still, the fact that these three powerful Democrats publically stated they are open to cutting the corporate tax rate, should give Republicans some ammunition to push not just for reductions in the corporate rate, but for making a case to repeal the recent income tax hikes passed during the first of the two special legislative sessions this past summer.  Those income tax hikes will affect some of the 80,000 small businesses incorporated as S-Corporations, which are taxed at the personal income rates.
Also, this gives Republicans an opportunity to take the fairness argument away from the Democrats.  During the O’Malley era the game’s been rigged for politically favored industries, yet taxes have gone up on small business and those industries not playing the Democratic game.
If Maryland Republicans want to start rebuilding (again) then they need to seize this tailor-made issue, and make the populist argument work for them.

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