Wednesday, February 01, 2012
Business Tax Update: Combined Reporting, Gross Receipts Tax, Millionaires Tax
The first wave of legislation to increase business taxes has been introduced in the Maryland Senate. The proposals include combined reporting, “millionaires’ tax,” and a gross receipts tax.
Combined Reporting: SB 269 would alter Maryland’s income tax laws to impose a system of mandatory unitary combined reporting for corporations. The Maryland Chamber has opposed combined reporting for a number of years. Instituting combined reporting would cause huge shifts in tax liabilities among Maryland businesses engaged in interstate commerce. Such a tax change is ill-advised during the current economic climate. The Maryland Business Tax Reform Commission evaluated the state’s business tax structure, and recommended against implementing combined reporting at this time. Maryland’s competitor states do not use combined reporting.
Millionaires’ Tax: SB 249 would reimpose the 6.25 percent personal income tax bracket on taxpayers with a net taxable income of over $1 million. The Maryland Chamber opposes this legislation because this tax falls disproportionately on small business owners, who need to reinvest funds into their companies to create jobs. Raising individual income taxes will make Maryland less competitive on a major tax with which we are over-reliant and uncompetitive. The Department of Legislative Services reports that Maryland has the 2nd highest state and local income tax revenue as a percent of personal income.
Gross Receipts Tax: SB 248 would impose an alternative minimum tax on corporations based on a percentage of their gross receipts. The Maryland Chamber opposes this bill. Gross receipts taxes are unfair because they are not based on profits or an ability to pay, and penalize industries that have high gross receipts but low net margins. Similar legislation was enacted and later repealed in New Jersey due to the negative impact on business. The bill would significantly increase business taxes on Maryland employers.
No hearing dates have been scheduled on these bills, but we will keep you up to date as legislative action progresses. For more information, contact Ron Wineholt at .(JavaScript must be enabled to view this email address).
