Finance

Maryland Hopes to Lure Manufacturers With Tax Breaks

by | April 13, 2017

By Michael Dresser

Manufacturers creating new jobs in Maryland could receive tax breaks under a bill Gov. Larry Hogan signed into law Tuesday, the product of a hard-won compromise that came together in the final hours of this year's legislative session.

The measure, which offers some relief from sales, property and income taxes in exchange for providing workers with skills training, was one of more than 110 bills the Republican governor signed at the traditional ceremony, held the morning following adjournment of the annual 90-day session.

He was flanked by Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, both Democrats. The three congratulated each other for working together collegially while glossing over three months of partisan broadsides.

"Most of our highest priorities all got done," Hogan said. "This is the way government is supposed to work."

Among the other high-profile bills the governor signed was the first major rewrite of the state's public integrity laws in about 15 years -- a measure that resonated during a session that opened and closed with accusations of corruption against some members of the General Assembly.

"It's really going to help us turn around this here in Annapolis," Hogan said, though his legislation was substantially overhauled by lawmakers.

The bill tightens the state's conflict-of-interest and financial disclosure rules for state officials. It was in part a reaction to the ethical missteps of Del. Dan Morhaim, the Baltimore County Democrat who was reprimanded over his advocacy for the medical marijuana industry at a time he was consulting for a license applicant.

The governor also signed a measure that came roaring into the session as his top priority -- his demand that lawmakers repeal a law they enacted over his veto last year setting up a scoring system for transportation projects that he scorned. By session's end, the issue had been politically defanged. Hogan's proposal to repeal what he called the "road kill bill" had been transformed into the Open Transportation Investment Decision Act. It delays implementation of the scoring law, kicking any confrontation down the road until after the 2018 election.

Watered down as it was, Hogan made it the first bill he signed Tuesday. He hailed it as legislation that would let scores of road projects, which he contended had been threatened, to move forward now. Miller and Busch flashed sour looks.

The Tuesday morning event was the first of multiple bill-signing ceremonies that the governor traditionally holds in the weeks after the session ends. He has until late May to decide which bills to sign, veto or allow to become law without his signature.

The manufacturing tax measure, which Hogan dubbed The More Jobs for Marylanders Act of 2017, is the product of tough negotiations among the House, Senate and administration. It combines much of what the governor wanted with some priorities of Assembly Democrats.

The original bill applied to "distressed counties," including several on the Eastern Shore and in Western Maryland, as well as Baltimore. The final version expands the eligibility to three more counties to be chosen by the state Commerce Department.

Hogan said it would "incentivize and encourage manufacturers to create thousands of jobs in the areas of the state that need them the most."

For new manufacturers creating jobs over the next 10 years, the bill provides sales tax refunds and state property tax credits, relief from filing fees and a 5.75 percent credit against income tax for the wages they pay. Some existing manufacturers can qualify for the income tax credit. The bill also provides for accelerated depreciation that would let companies write off the cost of capital purchases in one year.

For companies to be eligible for the tax breaks, they must offer programs that allow their employees to improve their job skills. The legislation provides scholarships for those workers and creates a new $1 million-a-year spending mandate -- a type of provision Hogan typically opposes -- to fund that program.

The combined income and sales tax breaks are capped at $10 million a year statewide.

Daraius Irani, director of the Regional Economic Studies Institute at Towson University, said the legislation appears to be a reflection of Hogan's pragmatism.

"This is just one more step in many steps going forward that will sort of cement Maryland's manufacturing promise," he said. Irani said Maryland manufacturers today operate smaller facilities than in the past, employing fewer workers but needing greater skills.

Combining Hogan's tax proposals with the Democrats' emphasis on work force development is a good idea, he said.

"Getting workers who are skilled is what they need," Irani said.

While Hogan praised the bill as a victory for his administration, Democrats pointed to the provisions they got into the bill.

Sen. Richard S. Madaleno Jr., a Montgomery County Democrat who played a role in crafting the compromise, said the final version includes many of his party's priorities. He dismissed some of the tax provisions Hogan originally proposed as "welfare" for companies.

Madaleno, a fierce Hogan critic who is considering a run for governor, made an appearance at the bill signing. When the manufacturing bill was called, the senator crowded into the picture, standing directly over the governor's shoulder.

Earlier, Miller had singled out Madaleno for his work during the session, saying he was a former legislative staffer who always checks on his colleagues' needs.

"I figure he's checking up on me," Hogan quipped as Madaleno grinned.

Baltimore Sun reporter Pamela Wood contributed to this article.

(c)2017 The Baltimore Sun

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