ANNAPOLIS – Maryland is losing at least $162 million per year through 28 tax breaks for the state’s wealthiest corporations, according to a report by the Progressive Maryland Education Fund.
Baltimore Gas and Electric Co. and Marriott International hotel chain are among corporate recipients of tax “giveaways” that otherwise could help balance the state’s budget, said the liberal-leaning Progressive Maryland.
“The governor has balanced the budget on the backs of working families,” said Sean Dobson, the study’s author and the group’s deputy director. “We should close down this giveaway because big corporations can surely afford the business tax burden and don’t need the help.”
Gov. Robert Ehrlich the past two years has proposed slot machine revenues to close Maryland’s budget deficits, which are estimated at $250 million for next year.
However, Dobson said current “prospects for slots are shaky” and revenues from slots would take a couple of years after construction begins to realize.
Instead of cutting agencies and adding slots, Dobson said he supports eliminating tax breaks for large companies to close the budget gap.
Ehrlich and Democratic lawmakers in the General Assembly “are equally implicated” in creating tax codes over the years that benefit “hugely profitable businesses and millionaires,” Dobson said.
Karen Syrylo, state tax consultant for the Maryland Chamber of Commerce, said businesses have already undertaken a huge share of state and local taxes.
Syrylo cited an Ernst & Young study showing Maryland businesses paid $7.8 billion in taxes last year.
“These tax breaks are incentives for businesses to locate here,” she said. “The result is that their activities create jobs and bring more money into the state treasury.”
BGE was granted a franchise tax credit, while its top executive, Mayo A. Shattuck III’s, salary tripled to $6.9 million in 2003, the report stated. The company’s press office didn’t return a phone call.
A Fortune 500 company, Marriott received property tax credits and other subsidies in 1999, after the company considered moving its Bethesda headquarters to Virginia.
Marriott reported earnings of $383 million last year and paid an effective tax rate of 1.7 percent from 2001 to 2003, according to a recent analysis by Citizens for Tax Justice and Institute on Taxation and Economic Policy, a Washington-based tax advocacy group and research organization.
Effective tax rate is actual income tax paid, divided by the company’s net taxable income before taxes.
Marriott’s media office couldn’t be reached for comment.
The report also was critical of tax breaks worth $14.5 million given to Maryland companies that financed their moves to lower-tax foreign countries.
Maryland-based corporations working abroad, unlike individuals who own foreign stock, don’t have to pay state income taxes. That cost is not available.
“It’s an excellent report that illustrates the special treatment given to monied interests in Annapolis,” said Jeff Hooke, chairman of the Maryland Tax Education Foundation, which educates citizens about the state’s tax policies.
“Sometimes, business tax breaks are a legitimate economic development tool, but the report shows that most such benefits can’t stand up to taxpayer scrutiny.”
Several tax breaks are for special interest legislation, rather than to help attract and retain businesses in Maryland, Hooke said.
The manufacturing sector received an approximately $30 million tax cut in 2001 for the creation of jobs, while the coal industry got an annual $10.1 million payment to bolster its flagging performance, Progressive Maryland said.
The report doesn’t have a complete list of corporations receiving the tax breaks.
The analysis drew upon the Department of Budget and Management’s Maryland Tax Expenditures Report Fiscal Year 2004 and research by the Institute on Taxation and Economic Policy and the Maryland Budget and Tax Policy Institute.
Michael Golden, spokesman for Comptroller William Donald Schaefer, wouldn’t comment on the report.
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