Groups gird for taxing special session on Monday

Chamber: Some measures more acceptable than others

The business community expects to be part of the solution to dealing with the deficit, said Georgette W. ‘‘Gigi” Godwin, Montgomery County Chamber of Commerce president and CEO. ‘‘However, onerous new taxes on business will harm Maryland’s ability to compete globally,” she said.

The chamber specifically opposes raising state income taxes on high-income payers, a ‘‘mandatory unitary tax” on corporate profits and expanding the sales tax to include more business services.

Everything else in O’Malley’s package, including raising the sales tax by 20 percent and legalizing slot machines at racetracks, should be considered by the legislature, said Lisa Fadden, the chamber’s vice president for public affairs.

‘‘We’re not endorsing those other proposals,” Fadden said. ‘‘We are just more open to considering them.”

If the state did more to help small businesses afford high-quality medical insurance for their employees, such businesses might be more open to tax increases, said Elise M. Ambrose, president of Elite Personnel, a small staffing company in Bethesda.

And doing so would likely attract more businesses from Virginia and other neighboring states that can add to the state’s revenues and reduce the need for tax increases, she said.

‘‘Health insurance is probably the biggest issue for small businesses,” Ambrose said. ‘‘I met Governor O’Malley before he was governor and told him that more has to be done to help small businesses afford health insurance. He listened, but I don’t think it’s the biggest item on his agenda right now.”

A proposal to increase the state’s tobacco tax would raise money to help make health insurance more affordable for both individuals and small businesses, according to a news release from the governor’s office.

Plan targets‘controlling interest’

O’Malley also proposes eliminating some elements of the tax code that he has said allow corporations to avoid paying millions in Maryland state taxes each year.

One provision he seeks to eliminate, known as ‘‘controlling interest,” allows companies to avoid real estate recording and transfer taxes by selling to out-of-state entities, according to the governor’s office. Another allows companies to avoid paying Maryland corporate income taxes by moving profits to subsidiaries in other states.

A recent report by the Maryland Comptroller’s Office says that almost half of the state’s largest for-profit companies did not pay corporate income taxes in 2005.

O’Malley hopes to end the practice through a process known as ‘‘combined reporting,” which requires companies’ subsidiaries to file taxes together rather than separately. The method has been adopted by other states.

Combined reporting provides a ‘‘comprehensive solution to a whole host of tax avoidance strategies,” said Johanna Neumann, a policy advocate for the Maryland Public Interest Research Group of Baltimore.

But the combined reporting measure could cost Maryland about 600 jobs annually by 2012, as businesses are prompted to leave the state or close, according to a recent report by accounting firm Ernst & Young. The report was commissioned by numerous business groups, including the Maryland Chamber of Commerce, Greater Baltimore Committee and chambers from Montgomery, Prince George’s and Frederick counties.

Combined reporting ‘‘would have the largest negative impact of all the options analyzed” as far as jobs lost per dollars of tax revenue gained, the report says. But the sales tax hike would result in a loss of more total jobs than the combined reporting proposal because more tax dollars are expected to be gained by the sales tax increase, the report says.

This report originally appeared in The Business Gazette.