TAX NEWS - JUNE 2010

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Maryland Tax: No study needed, scrap the corporate tax

On Monday, as part of his small-business plan, former governor Robert L. Ehrlich Jr. (R) proposed establishing "a bipartisan task force to recommend ways to make Maryland's corporate income tax more competitive with neighboring states."

On Tuesday, Brian Murphy, Ehrlich's little-known but spunky rival for the GOP nomination, proposed going ahead and scrapping the tax altogether.

"Our 8.25 percent corporate tax is one of many failed policies killing our economy," Murphy said in a news release. "As a small business owner, I can tell you firsthand the burdens of operating in Maryland. We need to empower business owners to grow their operations in our state."

Murphy, a Montgomery County resident who owns a bakery on Smith Island, said his goal would be to eliminate the corporate income tax within three years of taking office. He pledged to balance the state budget without raising taxes in his first year, cut the corporate tax in half his second year and eliminate it completely his third year.

The corporate income tax generates about $500 million a year for the state's general fund -- an amount that pales in comparison to personal income tax and sales tax, the state's two largest sources of revenue.

"It makes us wonder why we have the tax at all," Murphy said.

Ehrlich's small-business plan calls for rolling back an increase in the sales tax from 6 percent to 5 percent backed by Gov. Martin O'Malley (D). Ehrlich told reporters Monday that his task force would look for ways to lower the corporate income tax but did not say by how much.

Ehrlich's plan also calls for "a fundamental change in attitude" among state business regulators and includes task forces to study regulations and health mandates.
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