Clearing fiscal skies give Maryland executives hope in Annapolis -- Gazette.Net


An improved state budget outlook has Gene Burner more optimistic than usual that key projects will get more funding during this year’s General Assembly session, which starts Wednesday.

Burner, president of the Manufacturers’ Alliance of Maryland, a coalition of manufacturing companies that operate in the state, said he hopes a bill that would have tripled funding for the state’s research and development income tax credit — from $6 million to $18 million — last year will be revived this session. That legislation died in the House after the Senate approved it, 46-0.

“We hope that will pass this year,” Burner said. “We’ve been told it will be introduced again.”

The Tech Council of Maryland and other business groups also support increasing funding for the biotech investment tax credit from $8 million to $16 million, as well as more money for the Maryland Venture Fund. The tech business trade group also would like to see a new incentive such as a tax credit to help companies offset costs they incur when trying to win contracts from the U.S. General Services Administration.

In the latest budget projections released by state Comptroller Peter V.R. Franchot (D) in December, state revenues for fiscal 2013 were estimated to be $127.1 million ahead of September’s projections for the year. If that holds, revenues this year will be 5.5 percent more than in fiscal ’12.

Warren G. Deschenaux, director of policy analysis for the Department of Legislative Services, forecasts that the state operating budget could be just $27 million in the red next fiscal year. Over the past three years, the state has cut its long-term revenue shortfall known as the structural deficit from about $2 billion to under $500 million, he said.

More calls to cut corporate taxes

The more sanguine financial outlook, which is fueled by increased collections in income, sales, estate and other taxes, also has more officials calling to lower the rate of state income taxes for corporations. State Sen. David R. Brinkley (R-Dist. 4) of New Market prefiled a bill that would lower that rate to 6 percent from 8.25 percent, which he said would help even out Maryland’s competition with Virginia for corporate headquarters.

Virginia now has a corporate rate of 6 percent.

During the Maryland Chamber of Commerce’s recent business policy conference, Baltimore economist Anirban Basu called for the state to lower its corporate income tax to not only better compete with states such as Virginia, but offset the impact of any lower federal spending in Maryland.

The chamber’s legislative agenda opposes an increase in the state corporate income tax rate but stops short of calling for a reduction in that rate.

The chamber’s agenda is putting more emphasis on improving Maryland’s business climate so private-sector jobs can grow, chamber President and CEO Kathleen T. Snyder said. That’s important because of reductions in federal budgets in recent years, affecting the base of contractors in the state, she said.

“We have to do more to help Maryland’s private sector create jobs to pick up the slack,” Snyder said.

Maryland’s transportation infrastructure is a critical asset for economic competitiveness, said Donald C. Fry, president and CEO of the Greater Baltimore Committee. But stagnant revenue to the Transportation Trust Fund and lawmakers’ inability to adequately address the funding crisis in the past two decades have led to projections that Maryland will have no funds available for new projects beyond maintenance by 2018, he said.

“Lawmakers must address this compelling and urgent need to increase funding for transportation infrastructure and to enact measures to protect that funding from being used for other purposes,” Fry said.

The Greater Baltimore Committee would like to see funding increased for programs such as the Maryland Small Business Development Financing Authority, which helps smaller companies access capital, he said.

The mere discussion of major tax policy changes, such as implementing the combined reporting tax collection system and imposing new taxes on business services, is harmful to job creation and retention efforts, leaders of the Tech Council of Maryland said in their policy agenda. Such talk creates a “more difficult environment for companies looking to expand or grow in Maryland,” they said.

Corporate income taxes are the third-largest revenue-stream category for Maryland behind individual income taxes and sales taxes. Revenue from business income taxes is projected to leap by 38 percent this fiscal year over 2012 to $892.6 million. The growth is due to a steady rise in corporate profits since 2010 and a decline in tax refunds to businesses, according to a report by the state Board of Revenue Estimates.

“Part of the reason for the strong growth in corporate profits is the historically slow pace of job growth following the recession,” the report says. “Partly because employment growth is expected to slowly but steadily accelerate through the forecast period, growth in corporate profits is expected to decelerate from its current pace.”

If Brinkley’s bill passes, the business tax cut would take effect July 1. The bill is slated to be introduced Wednesday in the Senate Budget and Taxation Committee.

Seeing corporate taxes decline would be great, Burner said.

“I just hope they don’t do anything damaging to businesses, such as put in higher regulatory costs,” he said. “The emphasis should be to do no harm.”

Made in the U.S.A.

Legislation that would require state agencies to require public works project contractors and subcontractors to use or supply only goods made in the U.S. was filed again by Sen. Ronald N. Young (D-Dist. 3) of Frederick. The Maryland Senate passed that bill 46-0 last year only to see it die in a House committee.

The cost to add staff to implement and enforce the bill could exceed $540,000 in its first year, according to a state legislative analysis. But “small businesses may benefit to the extent their products are used in public works projects,” analysts said.

Young also filed a bill that would subject truckers and other vehicles to a new toll at the Maryland-Pennsylvania border along U.S. 15 north of Frederick. The legislation would help pay for several road projects, including an interchange at Monocacy Boulevard and U.S. 15 and the widening of U.S. 15 in Frederick from four to six lanes.

Young said he is pulling the legislation due to lack of support from county and state officials, though he may refile it after trying to garner more support.

Another bill prefiled by Young would allow a tax credit against the state income tax for 25 percent of qualified capital expenses made to establish or fund capital improvements to a Maryland winery or vineyard. The state would award a maximum of $250,000 in credits in 2013, $375,000 in 2013 and $500,000 annually after those years.

Young filed a similar bill last year that did not pass.

The Maryland chamber also supports an increase in the state fuel tax, as long as it remains dedicated for transportation infrastructure investment and maintenance; reforms of state pension and employee health insurance benefits; and making sure the private health insurance market operates in fair competition with the state-created Health Benefit Exchange.