Maryland businesses, governor need to go on 'offensive' to tackle high taxes, economist says

Originally published in the Baltimore Business Journal

MPPI in the News Joanna Sullivan | Editor-in-Chief, Baltimore Business Journal Jan 11, 2019

Anirban Basu says Maryland was not even in the running when it came to attracting Apple Inc.'s new corporate campus. The prize went to Austin, Texas.


Then of course, it lost Amazon Inc.'s coveted HQ2 to its neighbor across the river — Virginia.


Basu, CEO of the Sage Policy Group, said that should be a wakeup call to a state that has a 8.25 percent corporate income tax rate. In comparison, Virginia's is 6 percent.


"I really believe this state would collect more by reducing it to 6 percent," he said during a panel discussion on corporate taxes Friday in Annapolis.


But Basu and his fellow panelists at the Maryland Public Policy Institute conference at the Westin Annapolis said they're not optimistic there will be a change anytime soon. Basu was joined on the panel by Kelly Schulz, Maryland's Department of Commerce secretary, Richard Clinch, executive director of the University of Baltimore's Jacob France Institute and Mike O'Halloran, state director of the NFIB Maryland, an association that represents small and independent businesses.


They all agreed that the Maryland General Assembly won't move to reduce corporate income taxes despite decades of the business community's efforts.


"There's an economic contingent of Marylanders who think business is the enemy," Basu said.


He said Gov. Larry Hogan and the business community will have to go on the offensive to push for changes that can help the economy.


"Maryland has a tax problem and it's coming home to roost," Clinch, the University of Baltimore economist, said.


Clinch said in the 25 years he has been here he has never seen the legislature get close to passing a corporate tax change. He said high taxes are keeping some businesses away and causing the state to lose affluent and educated individuals.


To combat its tax unfriendliness, Clinch said the state needs to create more economic development incentives and invest in early stage companies. He said California and Massachusetts, both high-tax states, use that strategy.


Schulz talked about how Maryland has reduced regulations and improved customer service to make businesses feel more welcome as they try to expand and grow in the state. She also said incentives and tax credits, can help lead to job creation.


O'Halloran said he didn't expect any movement this year because of the specter of education funding looming over the General Assembly.


The Kirwan Commission has been reviewing Maryland's education laws and funding formulas for the last two years. The commission is expected to recommend billions of dollars in spending. The last estimate was $3.8 billion.


"That's a good chunk of change," O'Halloran said. "There are going to be some tough decisions in the halls of Annapolis."