WASHINGTON – Maryland could lose $345 million in corporate taxes over the next three years under an economic stimulus package being pushed in Congress, according to one budget policy group.
The Center on Budget and Policy Priorities said a provision in the plan — to let businesses write off 30 percent of their investment expenses immediately, rather than over several years — would cost Maryland $115 million a year, by cutting the taxable corporate income upon which the state draws.
The National Governors Association has estimated that the Republican- backed stimulus package could cost states $5 billion a year in lost revenues. The bill passed the House last week and is awaiting Senate action.
It comes as Maryland officials say they can ill afford additional lost revenue: Legislative fiscal analysts said Tuesday that the state already faces a operating deficit of up to $1 billion over the next few years.
“We are already in a bad way,” said Warren Deschenaux, chief fiscal adviser to Maryland’s General Assembly. “We are not likely to have enough current revenue to support the current budget.”
Deschenaux agreed with critics that the federal stimulus package will hurt the state, although he estimated that the impact might be closer to $50 million a year in lost revenue.
But supporters say it is shortsighted to simply look at the immediate loss in revenue.
“We reject the view that on the surface, less money for the state is a bad thing,” said Lisa Wright, a spokeswoman for Rep. Roscoe Bartlett, R-Frederick.
Wright said the proposed provision makes the state’s tax system more realistic, enhances business investment, and, in the end, benefits the state’s economy.
She said businesses are more likely to buy new computers, for example, if they can write off the cost over a couple of years — the typical lifespan of a computer. That incentive to invest in new equipment benefits the economy overall, she said.
“If they (small business owners) can recover their costs immediately, they have a chance to be more productive, which means they are going to do more work,” she said. “If they are doing more work, they are paying more taxes.”
In the end, she said, small businesses, which are the “engine” of the nation’s economy, will lead the state out of the financial slow down that was ignited by the events of Sept. 11.
But in an Oct. 25 letter to the Senate, the National Governors Association said the economic stimulus package would cut state revenues, aggravate existing state shortfalls and precipitate deeper state budget cuts.