Augustine Commission Considers Both Tax Decreases and Increases As It Prepares Report

A December 7, 2015, Daily Record article reported that the Maryland Economic Development and Business Climate Commission (also known as the Augustine Commission) considered both tax cuts and increases as it explored how to make the state more business-friendly. The article stated that the chair of the Commission, Norman Augustine, is currently writing a preliminary draft of the Commission’s report. From the article:

The proposed increases to the state’s gas, tobacco and alcohol taxes are among the options weighed by the commission as well as reductions to some personal income tax rates and speeding up the rate at which Maryland re-couples its estate tax with the lower federal rate. …

“While our role is to address business climate in Maryland, the business climate is affected by taxes that are not directly on businesses,”  Augustine said. “We’ve addressed taxes in general.”

The article summarized proposed tax decreases and increases that were considered by the Commission:

Included on the list of tax cuts being considered as Augustine drafts a preliminary draft of the group’s final report include:

  • Cuts to the top marginal personal income tax rates — the rate most likely to affect small businesses.

  • Increasing the speed in which Maryland’s estate tax exemption is increased to match the federal exemption. The change was passed in 2014 and will be fully implemented in 2019 and could reduce state revenue by an estimated $140 million.

  • Tax-free repatriation of profits held overseas.

  • Tax cuts for so-called pass-through entities.

  • Moving Maryland to a one-factor corporate tax structure based on the proportion of sales attributed to Maryland. Currently, the state uses a three-factor approach that also takes into account property and payroll taxes, which some say unfairly penalizes businesses who are headquartered in the state.

As far as possible increases:

  • A proposed 10-cent gas tax increase to address transportation needs. Economists at Moody’s Analytics told the panel earlier this year that improvements are needed to address the state’s transportation infrastructure including improvements to the port system in Baltimore. The state last raised the fuel tax in 2013 which automatically increases the rate annually based on inflation. Hogan attempted to repeal the automatic increases in a bill that died in the legislature earlier this year.

  • A possible increase in the excise tax on alcohol from the current 9 percent, which was passed in 2011, to 12 percent. The additional money would be earmarked for a venture capital fund managed by the state.

  • Boosting the per-pack cigarette tax by $1 and earmarking the money for work force development programs, possibly at community colleges. The General Assembly approved a $1 per pack increase during a special session in 2007.

The article also reported on the chilly reception from several legislators and state officials to any proposed tax increases:

“A reasonable person would be skeptical that tax increases would make it into the report given this (political) climate,” said Del. C. William “Bill” Frick, D-Montgomery County and a member of the commission.

But Frick added it will be hard for “legislators to endorse, in the abstract,” tax cuts without identifying offsets to make them revenue neutral. …

“No legislators were willing to (support) a tax increase based on what I saw,” said [Sen. Steve Hershey, R-Upper Eastern Shore]. “It was very definitive that no one was on board from a legislative perspective.” …

“As Governor Hogan has repeatedly made clear, Maryland’s high taxes have hurt our economy and business environment,” said Douglass Mayer, a Hogan spokesman. “Raising them even higher defies common sense and is not something he will ever consider.”

A spokesman for [Comptroller Peter] Franchot issued a similar statement.