Maryland Chamber of Commerce issued the following announcement on Feb. 5.
In light of recent federal tax revisions and a subsequent state revenue windfall, the Maryland Chamber of Commerce’s Business Tax Task Force, formed last summer, has been working to review the state’s existing business tax structure and policy. It is working to evaluate and determine what recommendations will be presented to key policymakers to enhance and improve Maryland’s business tax climate. With the assistance from the findings of Maryland’s Economic Development and Business Climate Commission, aka the “Augustine Commission,” the Task Force is proud to put forward two major policy reforms for the 2019 legislative session: a more competitive corporate tax rate and targeted relief for small businesses.
A competitive corporate tax rate
Much has happened in Maryland’s financial world since the rate was increased in 2007. Not only has the Supreme Court allowed Maryland to collect an additional $100 million a year in online sales, but, in aggregate, the comptroller estimates that Maryland’s largest employers will pay an additional half-billion dollars in taxes over the next four years due to federal tax code changes. Meanwhile, our top economic competitor, Virginia, has recently put forward an agenda this year to decrease its rate from six to five percent.
The Maryland Chamber has put forward legislation to lower Maryland’s corporate tax rate over the next three years from its current 8.25 percent to its previously far more competitive seven percent. According to its preliminary estimates, based on tax year 2015 data, corporate income tax revenue decreases by approximately $160 million by 2021, when the rate completes its phase down to seven percent. The revenue loss is split between: $127 million general fund dollars, $23 million Transportation Trust Fund dollars and $10 million Higher Education Investment Fund dollars.
Relief for small businesses
Legislators on both sides of the aisle have made several honest attempts in recent years to reform how Maryland’s small businesses are treated under the state’s personal income tax regime. With a top combined state and local rate of 8.95 percent, sole proprietorships, partnerships, limited liability companies and S-corporations—around three quarters of businesses in the state—face the highest rate in the region and one of the highest in the nation. Recognizing and alleviating this economic disadvantage was a key recommendation of the former Augustine Commission.
At this time, the Maryland Chamber is drafting legislation to allow small businesses to benefit from the new federal Qualified Business Income Deduction (Section 199A Deduction) on their state taxes. In general, Section 199A allows small businesses to receive a 20 percent deduction against their business income. Because of how Maryland structures its income taxes through the federal adjustment gross income, this deduction will not touch state tax burdens unless the legislature passes unique legislation. Since the passage of federal tax reform, several states—Colorado, Idaho, North Dakota, and Iowa—have allowed the federal provision to flow through, providing a boon to job creators within their borders. The Maryland Chamber roughly estimates that state and local personal income tax revenues will decrease by $25 to $30 million, with $15 to $20 million attributable to the state (general funds) and $10 to $12 million attributable to the locals.
Original source can be found here.
Source: Maryland Chamber of Commerce
Alerts Sign-up