Toys R Us, Burger King, Victoria’s Secret, K-Mart, among other corporations.¹

• An unknown but significant and growing number of multistate corporations exploit the Delaware Passive Investment Company (PIC) loophole, allowing them to create dummy firms in Delaware, where they hide money earned in Maryland from Maryland taxes.²
• The General Assembly’s Department of Legislative Services estimates that closing this loophole could save regular taxpayers between $20 - $150 million per year.³ Independent analysts believe the savings could be much higher.⁴
• Would the IRS or Comptroller let you get away with hiding your taxable income in a dummy firm in Delaware?

Colgate-Palmolive, Inc. and many other giant corporations.⁸

• Colgate-Palmolive and other corporations exploit the “no-where income” tax loophole -- an accounting gimmick that allows corporations to pretend that profits earned in certain states are not taxable in any jurisdiction.⁹
• Maryland is one of the shrinking number of states that still tolerates this loophole.¹⁰
• The Center on Budget and Policy Priorities says that corporations resident in states with this loophole can beat state taxes on 50% - 100% of their income.¹¹
• Can you afford to hire a fancy accounting firm to find a loophole like this for you?

Allied-Signal and many other giant corporations.¹³

• Allied-Signal and other corporations exploit the "non-business income" tax loophole by declaring that some of their income comes from “irregular transactions” – i.e., transactions outside their normal scope of activity – and therefore should not be taxed!¹⁴
• Would the IRS or Comptroller allow you to avoid taxes on income earned from a second job or the sale of a second home?

Aetna, Kaiser Permanente, CareFirst

• Unlike all other types of insurance companies, HMOs currently do not have to pay taxes on customer premiums.
• The General Assembly’s budget contains a provision requiring HMOs to pay a 2% tax on their premiums – just like all other insurance companies.
• HMOs can well afford to pay this tax: The industry as a whole increased profits 25 percent in 2001; Kaiser’s profits jumped 16 percent in 2001, up to $681 million on revenues of $19.7 billion.¹⁷

Schoolkids

• “A veto would require budget cuts that would likely hurt education and the poor…” (Washington Post, 4/10/2003)
• On the campaign trail, Ehrlich made an unconditional promise to fund the Thornton educational initiative.⁵
• But once in office, Ehrlich changed his tune, threatening to cut Thornton if the General Assembly refused to pass his plan to legalize gambling.⁶
• After a barrage of criticism, he flip-flopped yet again, saying that Thornton will be fully funded no matter what.
• But this claim is specious: Ehrlich has cut aid to localities by at least $100 million, so he well knows that localities will be forced to reduce spending on schools.
• The Governor’s aides admit that Ehrlich intends to underfund Thornton when they say that, “The Thornton Commission is all but a thing of the past at this point."⁷

Environment

• Although Ehrlich “continued a modest down payment toward cleaning up sewage treatment plants,” the Maryland League of Conservation Voters notes that, “The Governor’s budget cut funding and personnel for Department of Natural Resources and Department of the Environment…zeroed out funding for the Community Parks and Playgrounds program, diverted money from the Transportation Trust Fund and slashed funding for land conservation programs such as Program Open Space and Rural Legacy.”¹²

Poor Children

• The biggest flaw -- indeed, moral failure -- in the General Assembly's budget restricts eligibility for the Maryland Children's Health Program (CHIP).¹⁵
• As a result of this cut, fewer poor kids will receive subsidized health care.
• Ehrlich has raised no objections to this shameful cut – but he is howling in protest at the budget’s closure of corporate tax loopholes.

Working Families

• Higher Education got slashed $70 million by the Governor and another $20 million by the General Assembly.¹⁸ At a time of rising tuition, this cut will make college opportunity for working families even more difficult.
• Property Tax Hike on Homeowners
  • Ehrlich was the first to propose the idea of a property tax hike on middle-class homeowners, yet he now claims it was the General Assembly’s idea.¹⁹
  • Homeowners don’t have the option of creating a dummy firm in Delaware to avoid paying this tax.