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Maryland business executives are bracing for the almost inevitable program cuts and tax increase proposals as legislators prepare for today's opening of the 2010 General Assembly session.

With the state facing a budget deficit of up to $2 billion, the buzz phrase among business leaders is "prudent fiscal management."

"We need to grow the tax base by attracting new high-paying jobs, not by raising taxes," said Lisa Fadden, vice president of public affairs for the Montgomery County Chamber of Commerce. "We aren't necessarily advocating reduced spending in specific areas, but spending in general needs to be sustainable."

A bill to implement a new tax method for certain businesses referred to as "combined reporting" already has been pre-filed by Del. Roger Manno (D-Dist. 19) of Silver Spring. The measure would require companies that operate in numerous states to total their combined profits from all entities and then pay a portion to Maryland based on factors such as how much property, payroll and revenues were reported in the state. The proposal has been defeated several times in recent years.

Proponents say the measure is designed to close a loophole that allows multistate corporations to avoid paying taxes by transferring profits to out-of-state subsidiaries, while opponents say it will add to the cost of doing business in the state during continued lean economic times.

The Maryland Chamber of Commerce, Montgomery chamber and Greater Baltimore Committee are among the business groups that want legislators to wait on considering combined reporting until the Maryland Business Tax Reform Commission completes its evaluation of state corporate tax policies. The commission is slated to issue an interim report by Dec. 15.

"It's wise to let that group do its work and report back with recommendations," said Ronald Wineholt, vice president of government affairs for the Maryland chamber.

Manno's bill would also retain a higher state tax rate on individuals making more than $1 million, which is set to expire soon, to help strengthen teacher and state employees' pensions, among other uses. The state chamber also opposes that proposal.

Supports rise in gas tax

To help fund transportation improvements and other programs, the state chamber supports increasing the gasoline tax up to 7 cents as long as the Transportation Trust Fund is not raided to help finance the general fund. The group has supported raising the tax in the past, though legislators have shied away from doing that.

"We recognize that at some point, we will need additional revenues for our road system, or that system will continue to be degraded," Wineholt said.

The Montgomery chamber also wants to see transfers from the transportation fund curtailed, plus legislative support for projects such as the Metro Purple Line between Bethesda and New Carrollton, the Red Line extension to as far as Frederick, turn lanes along Route 355 and the widening of Interstate 270.

The Montgomery chamber is also advocating for a small amount of state pension funds to be invested in local technology start-ups and a continued high level of investment in public schools and universities.

"We are bringing legislators from both Montgomery and Prince George's counties together to focus on future transportation funding," Fadden said.

Medical insurance again figures to be prominent in legislators' discussions this session, with Congress possibly adopting federal changes. Employers need to remain in control of the process, Wineholt said.

Support for association insurance plans, which allow groups to negotiate lower premiums, is among the legislative priorities of the Greater Bethesda-Chevy Chase Chamber of Commerce.

Unemployment

insurance proposal

Gov. Martin O'Malley (D) has proposed using federal money to beef up the ailing unemployment insurance trust fund, to provide $83 million in immediate rate relief to employers.

But that proposal would result in more people collecting for longer periods with increased eligibility and perhaps higher benefit amounts, said Ronald Adler, CEO of Potomac human resources consulting firm Laurdan Associates and the Maryland chamber's representative on the General Assembly's Joint Committee on Unemployment Insurance Oversight. The Maryland Retailers Association and Maryland chapter of the National Federation of Independent Business also oppose the measure.

With more unemployed people seeking benefits, the trust fund has dwindled from about $895 million in late September 2008 to $220 million in November. Weekly benefits payments peaked at $24 million last March and were about $18 million a week in September.

O'Malley's plan would also allow employers to spread out payments over a longer time frame, which business officials applaud.

This report originally appeared in The Business Gazette.