Donald Fry: Bad timing for upcoming business tax report

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By Donald C. Fry

The Maryland Business Tax Reform Commission is nearing the completion of two years of work reviewing the way our state taxes businesses. This fall members of the commission will formulate its report to the General Assembly, which is due by December 15.

Having been asked specifically to review and evaluate whether Maryland should move its corporate tax structure to a “combined reporting” method, most observers consider it likely that the panel will recommend passage by the General Assembly of some form of combined reporting legislation.

Combined reporting requires corporations to include, in their tax computations, business activities of corporate affiliates outside the state.

The commission has also been asked to review and evaluate the potential elimination of “ineffective tax policies intended as development incentives.” In other words, the commission has been asked to look at Maryland’s business tax incentives and find some to eliminate.

Based on information posted on the commission’s web site, it appears that the commission is, among other things, considering recommending some form of legislation to measure the effectiveness of Maryland’s business tax credits.

Whatever the commission’s recommendations turn out to be, the timing couldn’t be worse for a report advocating for the potential imposition of more taxes on Maryland businesses and for our state’s elected leaders to work toward reducing tax incentives that nurture economic development.

Maryland is beginning to emerge from a recession that has ravaged our economy, and it’s pretty clear that the private sector, which drives not only our state’s economy but also government revenues, is not yet out of the woods.

New jobs created by private-sector employers in Maryland have yet to exceed the number of jobs lost, according to fourth-quarter 2009 data released this week by the U.S. Bureau of Labor Statistics. Maryland private-sector job losses have slowed significantly since 2008, but the creation of new jobs remains sluggish.

While Maryland’s job creation numbers could improve in 2010, it nevertheless seems hardly the time to impose more tax overhead on a business sector that continues to struggle to gain economic traction to pull out of the recession.

As for studying ways to potentially reduce business tax credits and other economic development incentives, I urge lawmakers to consider this:

The largest amount of total business tax credits claimed by corporations and individuals in any of the three years studied by the tax reform commission was $45.6 million, which was claimed in FY 2006, according to state data. That sum of credits amounted to less than one-quarter-of-one-percent – specifically 0.232 percent – of state funds spent that year.

Focusing on a miniscule sum of tax credits is like studying a very small grove of trees instead of the forest.

Given that the recession has emphatically demonstrated that business growth and job creation are the bedrock foundations of a healthy economy, it would seem more prudent to study ways to expand effective business tax credits and encourage business growth and expansion rather than cut incentives.

It’s critically important that our state’s elected leaders view business as a respected partner that fuels the economy rather than as an adversary.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Previous Center Maryland columns by Donald C. Fry:

For economic indicators, the ‘whipsaw’ effect continues

Do census data foretell a Baltimore city population rebound?

Remember the value of business after the election

New report ranks Baltimore among stronger regions to weather the recession

New living wage proposal: wrong idea, wrong time for Baltimore

Northeast needs more attention from federal rail planners

New national report has familiar ring for Maryland bioscience advocates

New report underscores Maryland’s work force development challenges

State’s health initiative: a ‘win-win’ for employers and their workforces

As Baltimore hikes taxes, are state’s counties next?

After the ‘fiber from heaven’ scramble, what’s next?

BRAC growth no longer a future event – it’s happening now

Economic development is a contact sport

Despite the recession, bioscience growth still percolates in Baltimore

State stumbles in enacting new education collective bargaining process

Wind power has potential in Maryland, but solar emerges as early renewable option

It's not good to be clueless in cyberspace

Amid fiscal shuffle, Maryland lawmakers pass measures to spur business growth

Thankfully, Baltimore leads with substance over style in luring Google

Leave damaging transportation provisions out of the budget

Amended budget continues recession-induced fund shifts and stimulus rescue

General Assembly setting stage for combined reporting push in 2011

Wrong timing for proposal to change Baltimore City school board

Baltimore City isn’t alone in facing pension funding challenges

A government investment program that delivers

Proposed transportation fund raid -- a bad habit continues

Where's the outrage over crime?

Small business is where innovation lives
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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.