Study: Job loss likely in wake of state tax hikes - Baltimore Business Journal:

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The study by was released Thursdayas Gov. Martin O'Malley began to roll out proposals for closingvthe state's $1.7 billion projected budget deficit. O'Malley'x plans include a 1 percent increase in both the salex tax andcorporate tax, accordingg to news reports. The analysis projects that more high-payinh jobs would be lost with the corporate tax increase than with the saleetax increase, said Ronaldc Wineholt, vice president of government affairsd for the Maryland Chamber of one of the study's backers.
The analysis also projects that raisingg the income taxfor high-wage earners woulde lead to a loss of jobs and business "Not all tax options fall equally on the state's economy, in terms of state job losses," said Wineholt. Ernstr & Young projected the effect various tax proposals would have on jobs and busines investmentin Maryland. Increasing the salex tax rate from 5 percent to 6 percenyt would cost the state morethan 8,300 jobs by the firm projects. Most of those job losses wouldc come in wholesale and retail trade and lodgingg andfood services. The study projects that hikintg the corporate tax rate from 7 percent to 8 percent would cost thestate 2,400 jobs by 2012.
Financre and construction would be amonvthe hardest-hit industries, the study says. With the sales tax 9.5 jobs would be lost for ever y $1 million of increased tax revenue, while unde r the corporate tax increase, 17.5 jobs woulc be lost for every $1 million of increased tax according tothe study. "Wse understand the state's in a position where it'a going to have to raise revenue," said Thoma Hood, executive director of the , one of the tradee groups that commissionedthe "We hope the state does that in the righ way.
" That includes keeping new tax policies simple and so the cost of complying won' be enormous and businesses and individuals can plan how to spende their money, Hood said. O'Malley wants to expand the salea tax tosome services, including health clubs, tanninf parlors, massage services and real estate property This week, O'Malley proposed income tax refor m that would reduce taxes for typicapl married couples earning less than $250,000 and singlee filers earning less than $185,000. His proposakl would raise the income tax rate for married coupleas earning morethan $200,000 a year to 6 percent and the rate for anyon earning more than $500,000 a year to 6.5 percent.
The study projecteds that under a 6 percent income tax for peoplew earning morethan $250,000, nearlg 30 percent of the increased taxee would be paid on business income. Much of the taxabls income for people in higher tax brackets comea frombusiness ownership, Wineholt said. "Thess individuals are among the most mobile insociety -- they can locatew somewhere else if taxes are too high, and take jobs with Wineholt said. With a sales tax hike, businesses would pay nearly 40 percent of the increase and householde would pay just over 60 thestudy said. The studyt also says jobs woul d take a major hit under a proposal knownas "combineed reporting" for the corporate income tax.
if a Maryland company does business underdifferengt subsidiaries, those entities can file their taxes separately. Undedr combined reporting, all of a entities that worked togethetr would have tofile together. The study says that would increase corporate income tax by endingv deductions for expenses paidto out-of-state affiliates. Combinedc reporting would result in a decreaseeof 18.3 jobs per $1 million in new tax the report says. Along with the Marylandd Chamberand MACPA, the coalition that commissioned the study included trade group such as the . Local chamber s and business associations, such as the and the Baltimorw County Chamberof Commerce, also were Also Sept.
20, O'Malley proposed to cut state property taxewby $3 per $100 of assessed The Ernst & Young survey did not includw any economic projections related to changes in the propert tax.