Opinion: Marylanders Want the Ultra-Wealthy and Big Corporations to Pay Their Fair Share

By Larry Ottinger

The writer is board chair of the nonprofit Our Maryland, a platform for promoting a just and sustainable future for all Marylanders.

The world’s wealthiest man is not happy. As Democrats floated a proposal to tax billionaires to address inequality and to pay for important investments in working families, Elon Musk lashed out at proponents of the idea.

When Sen. Bernie Sanders tweeted that “the extremely wealthy [must] pay their fair share,” Musk fired back, “I keep forgetting that you’re still alive.” And reprising an old GOP canard, Musk added, “Bernie is a taker, not a maker.” The workers assembling Tesla cars might more appropriately be labeled as “makers” and Musk the “taker” of a fortune fueled by nearly $5 billion in government subsidies for which Musk paid no federal income tax in 2018.

According to ProPublica, the top 25 billionaires in the U.S. paid an average federal income tax of 3.4% on their wealth gains between 2014 and 2018. Meanwhile, middle-class families – such as teachers, nurses and firefighters – pay taxes on their wages typically at “something like 14 percent.”

It is no secret that our federal and state tax systems are rigged in favor of the ultra-wealthy and large business interests who use paid lobbyists, election expenditures and public relations firms to secure lucrative tax loopholes and preferential treatment. The public wants this fixed.

At the national level, the Build Back Better Act would require large corporations to pay a minimum tax on profits hidden offshore and by their accountants here; apply a surtax on ultra-wealthy households making more than $10 million per year; and increase enforcement against ultra-rich tax cheats.

With these revenue sources, Build Back Better Act would invest in working families benefiting all Marylanders. As detailed by the Maryland Center on Economic Policy, Build Back Better would cut child poverty in Maryland by one-third, helping 1.1 million children. It would guarantee free, quality prekindergarten for all. It would enable 87,000 Marylanders with health care coverage, lower prescription drug costs, and support long-term care for our seniors and people with disabilities. It would provide critical housing rental assistance to 11,000 Marylanders. It would provide critical work supports, including affordable child care and an expanded Earned Income Tax Credit. It would create tens of thousands of jobs in clean energy and social services with a decent wage.

Marylanders should join with our remarkable U.S. Sens. Chris Van Hollen and Ben Cardin to get Build Back Better across the finish line. Because we’re next door to the nation’s capital – with its national media market – and to West Virginia, advocacy by Marylanders has an even bigger impact.

On the state level, a recently released report by Our Maryland with the Maryland Fair Funding Coalition reveals that nine Maryland billionaires have increased their wealth by an astounding $12.4 billion during the pandemic while hundreds of thousands of Marylanders, including essential workers, have struggled to survive.

Based on data compiled by Americans for Tax Fairness, the report shows that just this 18-month wealth gain by these nine Maryland billionaires could have funded the state’s FY 2021 allocations for “vulnerable populations and seniors; for “environment and natural resources;” and for “K-12 public education and local libraries” for all local governments combined. Indeed, this pandemic fortune could fund all of these important public investments combined, with $1.4 billion left over for good measure. And the nine Maryland billionaires collectively would still have the $25 billion they started with in March 2020.

The Maryland Fair Funding Coalition has put forward a list of common-sense reforms that would close special interest tax loopholes by and for the wealthiest while creating a fairer and better way to fund critical state needs.

According to the Maryland comptroller’s office, about one-third of the largest corporations operating in Maryland in 2017 and 2018 paid no income taxes. Notably, Under Armour — the company that has made Kevin Plank a Maryland billionaire — reportedly paid no state corporate income tax in 2017 while at the same time receiving $8.3 million in state tax credits.

The Corporate Tax Fairness Act introduced by state Sen. Paul Pinsky earlier this year would adopt “combined reporting” and the “throwback rule” to prevent large, multistate corporations from using accounting gimmicks to avoid paying an estimated $800 million in state taxes targeted for education and transportation. Meanwhile, Maryland’s small businesses – such as local retail shops and restaurants – find themselves at a competitive disadvantage and Maryland working families end up picking up the tab for the tax-avoiding corporations.

As another example, Maryland could address one of the most egregious boondoggles called the “carried interest” loophole. This special interest tax break was created by and for private equity and hedge fund managers, “some of the richest people in the world … to cut their tax rate nearly in half … [a] lower tax rate than their secretaries and the janitors who clean their offices.”

Maryland billionaire David Rubenstein of the Carlyle Group, who saw his wealth grow by a whopping $1.5 billion during the pandemic, has been a leading advocate for protecting the “carried interest” loophole and his growing fortune of now $4.3 billion. Even Donald Trump promised to close this loophole, saying the ultra-wealthy managers were “getting away with murder,” but never did.

Maryland Del. Julie Palakovich Carr and Sen. Pinsky introduced legislation earlier this year that would seek to close this loophole at least for money these investment managers are making in Maryland.

Unfortunately, these bills did not succeed due in part to political fears of misleading attacks associated with tax legislation even that closes special interest loopholes and benefits the middle class and small businesses. Gov. Larry Hogan and business allies have continually stoked these fears, including the infamous “rain tax” public relations slogan that distorted efforts to protect Marylanders across the state from devastating floods.

However, Marylanders – and Americans overall – overwhelmingly support policies to ensure that the ultra-wealthy and largest corporations start paying their fair share.

According to a February 2021 poll for the State Innovation Exchange and Strong Future Maryland, 75% or more of Marylanders support closing corporate loopholes, eliminating the “carried interest” loophole in Maryland and requiring multimillionaires to pay their fair share. Moreover, approximately three-fourths of Marylanders said they would feel better about paying their own taxes if the system were made fairer.

The public is far ahead of politicians on tax fairness, though the latter may be starting to pay attention. Trump and congressional Republicans thought they had teed up a winning issue with their 2017 sham tax cut bill, but the public correctly saw it as a “a give-away to the rich” that added $1.1 trillion to the deficit. This political ploy went bust as Republican candidates abandoned the issue in the 2018 midterms.

There are glimmers of hope in Maryland, too.

The Maryland legislature just overrode a Gov. Hogan veto to enact the Local Tax Relief for Working Families Act introduced by state Sen. James C. Rosapepe and Del. Carr. The new law takes an important step to improve our system by allowing counties to move from a flat tax where everyone pays the same rate to a tiered system in which the wealthiest pay more and working families pay less.

Similarly, earlier this year, state Senate President Bill Ferguson led the legislature to adopt over another Hogan veto a first-in-the-nation tax on digital ads on large technology companies like Facebook, Google and Amazon. While Gov. Hogan railed against it and Doug Mayer, his former deputy campaign manager and communications director, led a well-funded campaign of big business interests attacking it, the law passed without any public outcry.

As the calendar moves to state elections in 2022, tax fairness and putting the middle class above special interest loopholes for the richest individuals and corporations may become a defining issue but with a different public response than expected.

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