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Special session fallout to hurt county

November 13, 2007|By Brien Poffenberger

(Editor's note: This letter was submitted on Monday, Nov. 12. Because the legislature's special session is still going on, some of the facts cited here might change.)

Last week, as directed by Gov. Martin O'Malley, the Maryland General Assembly convened a special session and began retooling the state's finances. Starting with a plan proposed by the governor, the legislature has ground through a process - at once opaque and inaccessible - to address a $1.7 billion structural deficit.

The process is not over, but as legislation passes back and forth from House to Senate, it does not look good for Washington County, its businesses and the customers they serve.

The structural deficit resulted from imprudent tax relief in the 1990s and much-needed - though financially dubious - school aid in 2002. The debate about the problem is over; now we are debating the solution.

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The governor's plan called for spending cuts, state-controlled slot machines and lots of new revenue through taxes and fees. The Hagers-town-Washington County Chamber of Commerce has consistently supported slots and welcomes a referendum to finally settle the issue.

The budget solution, however, should rely more on reduced spending than increased revenue and the state should reconsider the burden it seems willing to impose on the business community and local government.

The special session has rendered the General Assembly incapable of an equitable distribution of the tax burden and there are two reasons why. First, a judicious legislative process is predicated on citizen input and reasoned debate. Not so in a special session. A senate committee extended the sales tax to include computer services without so much as a hearing and with no notice to constituents who might object. That measure alone will add $200 million to the Maryland business community's tax bill.

Second, though the governor tightly defined the scope of the special session, legislators are free to introduce any legislation, well-reasoned or not.

Washington County's most obvious example was the failed state attempt to grab control of our tip jar revenue, but there are others. House Bill 55 raises the annual fee for a limited liability company (LLC) from $300 to $1,000, a three-fold increase and a significant burden to very small businesses that LLC's were designed to protect.

Another bill, HB 50, introduced by Hagerstown Del. John Donoghue, shifts $7 million of dollars in teacher pension liability from the state to the county, enabling a disingenuous claim of reduced state spending while actually increasing our collective tax burden.

Many of the proposals that have survived from the governor's plan are little better, especially for our business community. The sales tax increase hurts all businesses and puts our retailers at a particular competitive disadvantage.

The senate has changed the specifics of the governor's plan to expand the sales tax to services, but not the impact on business - especially with the inclusion of computer services. The increase in the corporate income tax hits our part of Maryland hard, as companies that would have considered Washington County might now look elsewhere.

As it now stands, businesses will shoulder as much as two-thirds of the financial burden required to solve the budget crisis.

Misguided legislators, assuming that some corporate structure will absorb the shock, clearly do not understand the business community in Washington County.

Here, the proposed legislation will hurt the hair dresser and the cleaning service, the bookkeeper and the farmer, the landscape company and the local restaurant.

These are not nameless, faceless owners, greedy for profit and disconnected from the community. Rather, they are work-a-day residents whose success or failure can be determined by the whim of government tax policy.

They also are hard workers who give back to the community, bellwethers for the health of our economy and the vanguard of Hagerstown's downtown revival.

The Hagerstown-Washington County Chamber understands business and the Chamber urges legislators to reconsider some of the proposals gaining currency in Annapolis.

Brien Poffenberger is the president and CEO of the Hagerstown-Washington County Chamber of Commerce.

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