Expect A Taxing Session
Originally published in the Baltimore Business Journal
Some of Maryland’s highest-ranking elected officials gathered in Cambridge in October for a state chamber of commerce policy conference, giving the business community a sneak peak at the upcoming General Assembly session.
Depending on which part of the conference you listened to, you could have walked away with very different outlooks on the prospects for business-related legislation in 2016.
Lt. Gov. Boyd Rutherford stood in front of the room promising to change the state’s business climate while also cautioning that reforms would take time. Legislative leaders in plush chairs chatted about taxes and regulations.
More revealing than discussions about any specific policies was the way leaders vacillated between picking at partisan sticking points and promising to find consensus on important issues. State Senate President Thomas V. Mike Miller Jr., a Democrat, criticized Republican Gov. Larry Hogan’s administration for taking credit for business initiatives recommended by a commission the legislature created. Republican House of Delegates Minority Leader Nicholaus Kipke called it a shame that some want to make Hogan look unsuccessful.
But Miller also said legislators wouldn’t revert to name calling. Senate Minority Leader J.B. Jennings claimed lawmakers get along in Annapolis.
Now, three months later and just days before session convenes Jan. 13, predictions remain scattered. Some advocates think key business-focused proposals have finally gained enough momentum to pass in Annapolis. Others are more pessimistic, predicting party politics, the realities of the election cycle and reams of other proposed legislation could derail most business reforms requiring new laws.
“There is a flurry of activity with pre-filed bills,” said Kathleen Snyder, who retired as CEO of the Maryland Chamber of Commerce in June 2014 and is back in the role on an interim basis. “Time will tell.”
As cloudy as the forecast may be, most agree on a core set of business issues likely to be debated this session — chief among them taxes, job training and paid sick leave.
On the tax front, players are looking at a wide variety of reforms. Some, like the conservative-leaning Maryland Public Policy Institute, are talking about cutting the state’s corporate income tax rate. The institute said in a recent report that cutting the corporate tax rate from 8.25 percent to 6 percent would make the state more competitive for businesses, arguing such a move could end up attracting new companies and tax revenue over time.
Other groups including the Maryland Chamber of Commerce have been focused on more detailed tax issues. The organization backs complex reforms like tax relief for pass-through entities and a move to single sales factor taxation.
But movement on taxes will likely have to wait for the Maryland Economic Development and Business Climate Commission, also called the Augustine Commission after its chairman Norman Augustine. The commission — the legislatively created one Miller referenced back in October — offered a set of recommendations last year. Then it agreed to take on taxes.
It’s yet to come back with a tax report. One could be coming in mid- to late January.
Waiting on the Augustine commission could delay less-sweeping tax issues, including an angel investor tax credit the Greater Baltimore Committee has backed. The GBC pushed for the tax credit last year, but the measure didn’t make it into law. The GBC will continue to support the idea as a way to encourage investment in new companies, CEO Donald C. Fry said.
“We think that this is significantly important,” he said. “The biggest challenge that many startup companies have is not just the initial money that they get through friends and relatives. It’s the next stage.”
Another issue of particular importance in Baltimore is education, Fry said. Programs like early college models, industry-specific training, internships and apprenticeships need more money, he said. April’s unrest highlighted the need for more education, but so does an economy lacking middle-skilled workers, he said.
City politicians have been talking education as well. City Council President Bernard C. “Jack” Young said he’s trying to convince state legislators to back job-training partnerships.
“We’re focused on how we can get businesses to buy into what they used to do when I was in school,” Young said. “Work study programs, where kids actually did paid internships at their companies. If they didn’t want to go to college, they stayed on. It’s businesses stepping up to the plate, creating opportunities for some youth.”
Other issues business groups are watching include a proposal to require employers to offer workers paid sick leave. The measure, sponsored last year by Sen. Catherine Pugh, a Baltimore Democrat, didn’t make it into law. But there’s plenty of speculation it could be a higher priority for Democrats this year.
Pugh has argued the idea helps workers and businesses by preventing illness from spreading at the workplace. But the Maryland Chamber of Commerce plans to fight the proposal as an onerous mandate on businesses.
Sample business groups, lobbyists and business leaders, and you’ll hear about a slew of other issues they’ll be watching for in the upcoming 90-day session. The Maryland Chamber is preparing to resist a growing swell of support behind requiring Maryland businesses to offer employees retirement savings plans. The stance fits into a larger fight against mandates, said Deriece Pate Bennett, vice president of government affairs for the chamber.
“The state has consistently, for the past couple of years, been trying to propose different types of employer mandates that dictate the employee and employer relationship,” she said. “We believe that’s not the place of the state.”
Meanwhile, Fry floated procurement reform, mentioning the idea of a universal application process that would clear the way for minority and women-owned businesses to be certified at the state level and in all of Maryland’s municipalities at once. The Baltimore Metropolitan Council approved a list of legislative priorities including alternative commuter options and “last-mile” connections like bicycle and pedestrian routes from transit hubs to job centers.
Ask whether any of the other priorities will be approved, and no one can say for certain. There’s debate over whether Democratic and Republican leaders will see the second year of the Hogan administration as a time to get things done before the 2018 election starts looming or will turn to scorched-earth politics to try to gain an early advantage for election day.
Large-scale reforms like business tax overhauls will be difficult, said Roy Meyers, a political science professor at the University of Maryland, Baltimore County. Smaller business-related changes are more likely, he said.
“I’m sure you could put together a minor package where you can reach agreements on things like making the permitting process work better and making the state’s procurement process work better,” he said. “I can’t imagine they couldn’t reach agreement on a package that would clean up some of the problems.”
Still, businesses seem more optimistic about prospects for change this year, according to Annapolis lobbyist Gerard Evans.
“There’s a general mood that things are going to get better,” he said. “We’ve noticed a real change in the last year.”
Much of the lingering uncertainty stems from the fact that a huge chunk of the General Assembly was new last year, said Gene Burner, Manufacturers’ Alliance of Maryland president. About a quarter of state senators were freshmen, as were over 40 percent of delegates.
“They were barely in office last year,” he said. “This one is just going to be feeling our way through and seeing how far each side wants to push.”