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1 Elizabeth L. Malm, Issues Associated with Corporate Income Taxation 1 (2013)

handle is hein.taxfoundation/taxfaabf0001 and id is 1 raw text is: Issues Associated with Corporate Income Taxation
Elizabeth L. Malm
Economist, Tax Foundation
Hearing of the Ways and Means Committee of the
Maryland House of Delegates
February 26, 2013
Members of the Committee:
My name is Elizabeth Malm and I am an Economist at the Tax Foundation, a non-partisan,
non-profit organization founded in 1937. We analyze tax issues at all levels of government and
raise economic awareness among taxpayers, lawmakers, and the general public. I am also a
Montgomery County resident.
I am pleased to have the opportunity to speak with you today regarding House Bill 261, a bill
that would reduce Maryland's state corporate income tax rate from its current level of 8.25
percent to 6 percent. The Tax Foundation takes no position on this bill, but I am eager to
offer analysis based on our examination of corporate income taxation in general. Maryland
and other states considering tax reform should be fully informed about the benefits and costs
associated with various tax instruments. We find two compelling reasons that corporate taxes
are a poor instrument for collecting tax revenue. First, corporate taxes are detrimental to
economic growth; and second, they provide unstable and inadequate revenue over the business
cycle.
As of 2012, Maryland's corporate income tax rate was the 15th highest nationally and the third
highest in the region. The most problematic rate differential, however, is the significant
difference between Maryland and neighboring Virginia. Virginia's corporate rate is only 6
percent-more than two percentage points lower than Maryland's. Businesses choosing to
locate in the Washington, D.C. metropolitan area have the choice between three
jurisdictions-Virginia, Maryland, and D.C. Potential tax burden is most certainly one of the
costs a business considers in choosing where to locate. Reducing the corporate rate would
make Maryland even more competitive in relation to its neighbors.
Issue #1: Corporate tax rates are harmful to economic growth.

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