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BALTIMORE CITY, MD (September 21, 2007) – Governor Martin O’Malley joined with Baltimore City Mayor Sheila Dixon to announce plans to close corporate loopholes that allow corporations to forego millions in Maryland state taxes each year. Standing on a rooftop between Downtown Baltimore and the Albemarle Square community with Mayor Dixon, O’Malley outlined plans that would require corporations in Maryland to pay their fair share.
“Businesses that benefit from our state’s services must be willing to invest in those services with their tax dollars, so that everyone is paying their fair share,” said Governor O’Malley. “Today, we are taking steps to close corporate loopholes that allow large corporations off the hook, while Maryland’s middle class families and small businesses foot the bill.”
“I want to thank Governor O’Malley for working together with the people of Baltimore to solve our State’s structural deficit and for making the tax structure fairer for working families,” said Mayor Sheila Dixon. “By closing these corporate loopholes, the City of Baltimore will be able to put more dollars into public safety, public education and public health.”
Under Governor O’Malley’s plan, corporate loopholes known as “controlling interest” and “combined reporting” would be eliminated and closed. Currently, under the “controlling interest” loophole, large corporations in Maryland are allowed to avoid real estate recordation and transfer taxes – 2% of the sales prices that Maryland families and small business have to pay. Last year, a Philadelphia-based company sold the 30-story Alex Brown Building in downtown Baltimore to another out-of-state company and avoided paying an estimated $2.4 million in city and state transfer and recordation taxes. At least 10 other states and the District of Columbia have closed the loophole.
Under the “combined reporting” loophole, some of the largest corporations that receive Maryland services avoid Maryland taxes by shifting profits to subsidiaries in other states. According to a report released in July by the Comptroller’s Office nearly half of Maryland's largest for-profit companies did not pay corporate income taxes in 2005. The report showed that of the 132 largest corporations in Maryland, 64 did not pay corporate income taxes in our State. Under the Governor’s plan, corporate loopholes would be closed to make sure all corporations doing business in Maryland share the tax burden equitably.
Today’s announcement marks the third by O’Malley in as many days, as he rolls out his solution to Maryland’s $1.7 billion structural deficit. Previously, the Governor has announced plans to reform Maryland income tax structure – making it more progressive for working families, cut Maryland’s property tax rate by 3 cents and expand Maryland’s sales tax. Under the Governor’s plan, a vast majority of Marylanders - over 83% - would pay less in taxes than they currently do. Under the Governor’s income tax plan, ninety-five percent (95%) of Marylanders would pay less and over 2.1 million tax-filers in Maryland would experience a tax reduction or no change in their income tax.