February 28, 2007

ITEP Testimony on Combined Corporate Income Tax Reporing in Maryland


My testimony today examines a problem facing not just Maryland, but a number of different states – the erosion of the corporate income tax and the related emergence of profitable “zero-tax corporations.” I also will discuss the single best strategy available to lawmakers seeking to respond to the problem of corporate tax avoidance – mandatory combined reporting. Requiring combined reporting of the income of multi-state corporations would help ensure the long-term viability of the Maryland corporate income tax. It would also make the corporate tax more equitable – both among businesses and between businesses and individual taxpayers – by eliminating the incentive for multi-state corporations to avoid state income taxes by artificially shifting income from one taxing jurisdiction to another. Moreover, just as corporate tax avoidance is a problem that confronts both Maryland and other states, several other states—most notably, Massachusetts, New York, and Iowa—are now considering the use of combined reporting.

Read the Full Report (PDF)