NCPA - National Center for Policy Analysis

JOB LOSS LIKELY IN WAKE OF STATE TAX HIKES

September 21, 2007

Maryland governor Martin O'Malley's tax increase proposals could lead to significant losses of high-paying jobs, say the authors of a tax policy study released by Ernst and Young.

Consider:

  • Increasing the sales tax rate from 5 percent to 6 percent would cost the state more than 8,300 jobs by 2012; most of those job losses would come in wholesale and retail trade and lodging and food services.
  • Hiking the corporate tax rate from 7 percent to 8 percent would cost the state 2,400 jobs by 2012; finance and construction would be among the hardest-hit industries.
  • With the sales tax increase, 9.5 jobs would be lost for every $1 million of increased tax revenue, while under the corporate tax increase, 17.5 jobs would be lost for every $1 million of increased tax revenue.

In addition, jobs would take a major hit under a proposal known as "combined reporting" for the corporate income tax, say the study's authors:

  • Today, if a Maryland company does business under different subsidiaries, those entities can file their taxes separately.
  • Under combined reporting, all of a business' entities that worked together would have to file together.
  • That would increase corporate income tax by ending deductions for expenses paid to out-of-state affiliates.
  • Combined reporting would result in a decrease of 18.3 jobs per $1 million in new tax revenue.

Source: Rachel Sams, "Study: Job loss likely in wake of state tax hikes," Baltimore Business Journal, September 20, 2007.

For text:

http://www.bizjournals.com/baltimore/stories/2007/09/17/daily33.html

 

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