Speaker Mike Busch

Budget and State Government

Protecting State Workers
The House of Delegates unanimously passed two bills to tighten the State’s personnel system, including the hiring and firing power of the Governor.House Bill 161, Governor's Appointments Office and Appointing Authorities - Duties and House Bill 162, State Employees' Rights and Protections Act of 2007, were the result of nearly 18 months of work by a committee jointly appointed by Speaker Michael E. Busch and the Senate President and resulted in legislation tightening the personnel system to protect State employees.

“This legislation is about the long-term integrity of the State’s work force,” said Speaker Michael E. Busch. “The State needs to be able to attract and retain high quality employees regardless of who is in the Governor’s office or the legislature.”

The Special Committee on Employee Rights and Protections was appointed in August of 2005 as a result of the highly-publicized termination acts of the prior Administration. The Committee completed its work in January 2007, and reported the results the Legislative Policy Committee. House Bills 161 and 162 were the result of the committee’s work.

The bills take effect June 1, 2007.

Forcing Big Business to Pay Their Taxes
The House of Delegates voted unanimously to prohibit companies from using captive Real Estate Investment Trusts (REIT) to avoid corporate income taxes.House Bill 1257, Captive Real Estate Investment Trusts, included 16 bipartisan sponsors.

The Wall Street Journal reported in February that companies across the country regularly use real estate investment trusts to avoid paying hundreds of millions of dollars in taxes to state governments. Companies set up real estate investment trusts in order to pay themselves rent, which then becomes a tax-deductible expense. This practice is still legal in 27 states. According to this report, in one four-year period, Wal-Mart avoided $350 million in taxes across the country by using this strategy.

“National companies are coming to Maryland and taking advantage of our tax system for their own profit,” said Speaker Michael E. Busch. “The House is taking action to close all of the loopholes that take dollars away from the State coffers.”

Analysts project that the State could be facing up to a $1.5 billion deficit in FY2008. By closing this loophole, the State stands to collect nearly $10 million next fiscal year.

Closing Tax Loopholes on Real Estate
House Bill 475, The Public School Construction Assistance Act of 2007, closes a loophole used by developers and out-of-state businesses to avoid paying taxes on real estate transactions. This bill also passed the House of Delegates under Speaker Busch’s leadership.

“This is about basic fairness in our tax code,” said Speaker Michael E. Busch. “Developers and out-of-state business interests should not be able to avoid the closing costs that working families have to pay.”

HB 475 closes a tax loophole that currently allows for the creation of controlling interest companies to avoid paying transfer and recordation taxes on real estate valued at over $1 million. The State’s share of the proceeds collected from this legislation is estimated at $7 million for FY2008 and increasing up to $14 million in future years. The funding would be directed to, Program Open Space as well as earmark up to $5 million to the Department of Natural Resources to defray park admission costs across the State and support the Maryland Park Service.

The local jurisdictions will receive the remaining funds, $24 million in FY08 and $48 million in future years, to support public school construction and renovation costs. A form of this legislation passed the House of Delegates three times last term but was not taken up by the Senate. The bill did not come for a vote before the Senate again this session.