Economist backs lower Md. corporate tax, and some legislators agree

Legislators at chamber

From left: Matt Palmer, government affairs vice president at the Maryland Chamber of Commerce, moderates panel of Sen. Ed Kasemeyer, Del. Sheila Hixson and Sen. Rob Garagiola.

By Sam Smith

In the midst of America’s fiscal crisis, economist Anirban Basu told members of Maryland’s Chamber of Commerce that it is imperative for the state to lower corporate income tax to create better opportunity to attract capital investment to offset the impact of decreased federal spending.

Speaking at the chamber’s business policy conference in Ellicott City on Friday,  Basu said the Free State is three times more vulnerable to the impact of federal reductions than any other state.  The number of Americans that work for the federal government is 2.1%, while 5.2% of Marylanders get a federal paycheck. With extensive cuts scheduled for the Department of Defense and National Institutes of Health, both staples in Maryland’s economy, Basu said Maryland is in for a “world of hurt.”

“We need to change our economy and position ourselves to attract more private capital,” Basu said. “How do you do that? By having one of the worst business tax climates in the country? No. That is, actually as it turns out, not the way to do it.”

10th worst business tax climate

Basu cited the Tax Foundation’s 2013 State Business Tax Climate Index which ranked Maryland as the 10th worst business tax climate in the country and should be concerned with staying competitive with Virginia in attracting potential businesses.  Although Virginia also relies heavily on federal jobs, they have historically lower unemployment rates than Maryland and have the sixth best corporate tax climate in the nation, compared to Maryland ranking 15th.   Virginia’s corporate income tax is 6% and hasn’t been raised in 40 years, while Maryland has an 8.25% rate.

“Maryland doesn’t outscore Virginia on any dimension,” Basu said. “Virginia is our primary competitor and we just do not compete.”

After Basu’s presentation,  leaders from three Maryland companies, W.L. Gore & Associates, Old Line Bank and Merritt Properties, said in a CEO panel that they also feel Maryland needs to develop tax policies that will help grow Maryland business.

Legislators agree on lowering corporate tax

Later in a legislative panel with Del. Sheila Hixson and Sens. Edward Kasemeyer and  Rob Garagiola, the three lawmakers agreed that lowering the corporate tax would be in the best interest of the state.

Hixson, a Montgomery County Democrat and chair of the House Ways and Means Committee, said that a decrease has not been considered in any of the House’s tax plans.

“I would be happy to work with Ed to see if we can get together with the House and Senate and certainly go forward with hearings and getting what kind of fiscal impact it has,” Hixson said. “Sometimes in the state legislature we get accused of not being business friendly, but there is a sense that we want everybody working together in this point in time to help you.”

Kasemeyer, a Howard County Democrat and chair of the Senate Budget and Taxation Committee, proposed cutting one quarter of one percent per year until “the impact wouldn’t be so significant every year.”

“I think it would be for the better of Maryland if we could reduce it,” Kasemeyer said. “From a perception basis, the 8.25% rate makes us look out of line. We get around $750 million from the corporate income tax.”

Although Garagiola, Senate majority leader, said that Maryland does rely too heavily on federal jobs, the state has taken action to diversify its economy in recent years.

“The are a number of things that we put in place, the research and development tax credit, to try to foster and grow other industries,” he said. “Biotech, high tech, even greentech. It’s one of the fastest growing sectors in our state. There were a lot of jobs created in that sector even during the recession.”

“We got to react to what they do at the federal level,” Garagiola added.

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.


  1. cwals99

    These are the stats…..80% of Americans want wealth inequity reversed and 80% want corporations/banks held accountable to law. Economists all say that our economy is stagnant because of these issues. Taxes have nothing to do with it! Maryland has billions in health fraud and billions in financial fraud yet to come back to the state so we want our legislators to start the process through a tax surcharge specifically for corporate crime. These businesses will be paying for a decade or more to return what is trillions in fraud across all business sectors.

    Knowing that the rich and corporations need to pay their fair share of the deficit and knowing that they created the deficit, the last thing you will hear is a call to lower taxes. Remember, there are aiding and abetting laws!

    Next, people sat these three years as $3 trillion in corporate tax breaks……bringing the average tax rate for businesses to 17% even as we were accumulating more and more debt. It appears national debt doesn’t matter unless you are trying to slash public programs and employees. If corporations do not want to move to Maryland because of high taxes then we have succeeded in moving our economy to one of small business growth which is what everyone wants! So, all we need is state funding equal to business tax credits for this past decade given the the Small Business Administration and let mom and pop grow our economy.

    Tax corporations progressively…..small businesses won’t be hurt! Stop listening to Basu.

  2. abby_adams

    Picking winners & losers yet again. Funny how they didn’t object to giving casinos a tax break but not small businesses or the newly $100K rich.

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