QUESTION: Is it appropriate for the comptroller to advocate for changes in the tax code? If so, what would you like to see changed?

MR. FRANCHOT: As the state's tax collector and enforcer, the Comptroller is in the unique position to serve as the state's tax policy advisor. Given that Maryland has a part-time legislature and a 90-day legislative session, there is much need for expert advice on tax policy and a proactive agenda that provides for corporate accountability and tax fairness. The following are changes that would help achieve those two principles:

1. Reigning in corporate giveaways in the state's tax code.

Every year my colleagues and I on the Appropriations Committee review and re-assess every line item in the state's budget. We are forced to make difficult choices to ensure that our many spending priorities fit within our limited revenue growth.

At the same time, revenues that the state foregoes through giveaways in the state's tax code are not subject to the same review and reassessment. Once a giveaway-a tax credit or deduction or other specialized tax treatment-is on the books it continues in perpetuity until the legislature repeals it, which does not happen often.

Some of these giveaways amount to relatively small revenue losses-such as the estimated $700,000 per year in lost revenues that result from a provision that exempts bulk purchases of gold and platinum from the state's sales tax. Others are large-such as a recent change in Maryland's corporate income tax apportionment formula that cost the state an estimated $30 million in its first year.

I would propose a policy that would require any tax giveaway that does not expressly and broadly benefit individuals and families be sunset every five years and be subject to reapproval by a majority of the General Assembly. Each tax provision would be required to be passed as a stand alone bill; tax giveaways could not be bundled into one omnibus tax giveaway bill.

The law could establish that specified shares of the new revenue collected from expired provisions would be allocated to fund Maryland priorities such as the preservation of open space and investments in early education.

2. Eliminating Zero-Tax Corporations

In 2004, a small Maryland think tank published a report that showed that 70 percent of Maryland's 131 largest corporations paid NO Maryland corporate income tax. A review of SEC filings of these same corporations showed that virtually all of them were in fact profitable. However, they used gaps in federal and state corporate income tax codes to avoid paying taxes.

In 2005, I introduced legislation to create an alternative assessment that would ensure that all large corporations would be subject to the state's income taxes. This legislation failed, in part because my leadership on the Appropriation's Committee provided me with only limited leverage on matters of tax policy and more importantly, limited time to shepherd this through the tax committees.

As Comptroller, I would have the resources and opportunity to both shed light on the problem of no-tax corporations in Maryland and develop comprehensive and effective solutions to the problem. I will publish annually a report on the tax payments of Maryland's largest corporations; note the loopholes that provide the opportunity for corporations to avoid paying taxes on their profits; and clarify changes in tax law that would fix these problems.