I support this effort but also focus on a long overdue policy change that would benefit small businesses – if they recover from the pandemic and for years to come.
There are two major loopholes in our Maryland corporate tax system. Together, they enable many large, profitable corporations to drastically reduce or eliminate their share of state taxes.
The Maryland Comptroller’s office has documented that in any given year, approximately one-third of the 150 largest companies doing business in the state did not pay state corporate taxes. These large companies use clever bookkeeping to take advantage of state tax laws and reduce their tax obligations.
Maryland’s small businesses – printers, manufacturers, cafes, independent bookstores, restaurants, and many more – simply cannot exploit these types of loopholes. They pay a fair share of government taxes and are confident that they will support the services that they and their customers depend on.
The Corporate Tax Fairness Act of 2021 that I introduced would fill those huge loopholes that give big companies an unfair advantage. Large companies with multiple states would have to file their taxes using “combined reporting”. It just means that all parts of a business, including subsidiaries, are taken into account when determining how much profit a business is making in Maryland. This prevents companies from moving paper funds to subsidiaries outside of the state to artificially lower their taxes in Maryland.
That is anything but radical. In DC and 28 other states, including Texas, Kansas, and Montana, there is little need for combined reports, little for advanced bastions. Each of these states has made sure that their small businesses can compete fairly with larger businesses.
My main goal with this legislation is to make sure these large corporations pay their fair share of Maryland taxes. This ensures that smaller companies – without access to these loopholes – are on an equal competitive basis.
I have proposed this bill for several years, and Maryland has lost the revenue it needed for failing to act. The Maryland Center on Economic Policy estimates that our state could have generated additional revenue of $ 515 million between fiscal years 2014 and 2018 through these moves.
All businesses should pay their fair share to support the public services that enable them to make a profit – whether it’s the schools educating the children of their employees, the streets they take to work, the parks that visit them, or so many other important public institutions.
Maryland will continue to need additional income going forward to fund our landmark education reform plan and address issues such as climate change and the vast differences in health due to race and geography. Closing these tax loopholes will generate significant new revenue that will help us meet these pressing needs – and in ways that will make our economy more competitive.
The public understands the importance of this type of legislation. According to a recent poll by a leading Maryland polling company, 79 percent of Maryland voters support closing these gaps.
This is the year to finish work. Regardless of how you view the role of the state in providing services or the right size of state government, we should all agree that our tax system should at least provide fairness to everyone – individuals and businesses. Huge corporations and many wealthy individuals play the tax code in order to pay little to no tax.
It is time we stood up for tax justice.