The League of Women Voters of Maryland believes that Maryland should have an adequate and fair system of taxation. We, therefore, support the Governor’s proposals for changes to the current system of corporate taxation. Specifically, we support an increase in the tax rate of the corporate income tax from 7% to 8% and adoption of the combined reporting and controlling interest proposals. It is incumbent upon all Marylanders to contribute to the solution of the problem of the structural deficit. Even with an increase to 8%, the Maryland corporate tax would be the lowest in the region. We do have concerns about the Governor’s proposal to dedicate the increase in revenues from the corporate income tax to transportation and education. Given the size of the deficit in the General Fund and the unmet needs of government services overall, it does not seem to us to be a wise move at this time. The closing of the “controlling interest” and “combined reporting loopholes” would make the corporate tax system fairer since these loopholes provide benefits to non Maryland based corporations that Maryland based corporations do not have. According to the governor’s press release, one sale of an office building in Baltimore by an out of state corporation to another out of state corporation resulted in the loss of an estimated $2.4 million in city and state transfer and recordation taxes. This and similar examples are unconscionable. In fact, at least ten other states and the District of Columbia have recognized this and have closed the controlling interest loophole. We hope that the Maryland Legislature will do so as well. The Comptroller’s announcement that half of the biggest corporations of the state no longer pay any Maryland income taxes was a wakeup call that supports the need for the adoption of combined reporting. Currently, corporations are able to shift funds to other states where they will be taxed at a lower rate. According to the Multistate Tax Commission, a national, bipartisan association of state comptrollers and revenue departments, Maryland may be losing up to 34% of the corporate income taxes we should collect each year. Combined reporting requires corporations which do business in other states to have a single set of books so that all of its profits are reported. Then profits can be allocated according to the usual factors of payroll, sales, and property. The League of Women Voters strongly supports all of the above changes to the corporate tax system and urges the Legislature to do so as well.