NCPA - National Center for Policy Analysis


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.


  • 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.

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