Baltimore City Council proposed new energy tax

A City Council committee approved more than $15 million in new taxes and announced a deal with hospitals and universities that will net the city another $20 million over the next six years.

But the taxation and finance committee delayed action on a proposal to apply the city's energy tax to industrial businesses, over what its chairwoman, Councilwoman Helen Holton, described as "a technical issue."

During a session devoted to finding new revenue to narrow the city's $121 million budget gap before the end of the fiscal year on June 30, Holton announced that city officials had reached an agreement with hospitals and universities on a payment in lieu of taxes, or PILOT, that would take the place of a proposed $350 annual fee for beds.

Under the terms of the deal, which was signed by the presidents of the Maryland Hospital Association and the Maryland Independent College and University Association, the nonprofits would pay the city $5.4 million for the first two years and smaller payments in the next four.

According to a copy obtained by The Baltimore Sun, the deal would protect hospitals and universities from increases to telecommunications and energy tax rates over the six-year period, although they would experience rate increases this year. The committee voted to increase hotel room taxes, parking rates, an excise tax on billboards and the energy tax for residents, nonprofits and nonindustrial businesses.

The same cannot be said of the major new tax proposal City Council President Bernard C. "Jack" Young has put on the table this week to replace most of the revenue from the beverage tax. Ms. Rawlings-Blake proposed increasing energy tax rates for residential, commercial and nonprofit users. Mr. Young is proposing adding industrial users to the mix on the grounds that it's only fair that they, too, shoulder some of the burden.

But because of the vastly greater amount of energy used by industry, such an increase would not be equitable. Consider this: Increasing the rate for all commercial and residential customers by 15 percent and increasing the rates for nonprofits by more than 50 percent would raise about $8.2 million; adding industrial users would, by itself, raise $9.1 million a year. That's a big burden spread among a small number of firms.

New Jersey Film and Television Tax Credit Program

Film producers, production workers, union organizers and even a TV actress put a touch of drama into a state Senate Budget Committee hearing in Secaucus, denouncing Governor Christie’s plan to suspend a film and television tax credit program in New Jersey.

Representatives from "Mercy" and "Law and Order: Special Victims Unit" urged Republican Gov. Chris Christie to reconsider ending the 20 percent tax credit the state has offered since 2006 to lure movie and TV production companies to the state. Both TV series are filmed largely in New Jersey.

The program provides $10 million a year in tax credits for television and film productions. Companies that spend 60 percent of their production budget in New Jersey are eligible for a tax credit of up to 20 percent of that expenditure.

Supporters say the economic activity generated by film and television companies attracted by the program brings in far more in taxes than is spent on the credits. But Christie’s office released a statement saying the state’s budget shortfall was so dire that “cuts had to be made and priorities considered in closing a $10.9 billion budget gap.”

The interest in New Jersey has a lot to do with the money the film and television industry spend to market and promote New Jersey based shows.

Oil Refining Industry Federal Tax

A key oil-refining industry organization is opposing a provision in a Senate bill that would quintuple a federal tax specifically used by agencies to clean up oil spills because it would increase fuel costs for consumers. Senate Democrats brought up a measure that would couple a fivefold increase in the tax oil companies pay into a spill fund with help for the jobless, doctors, and cash-starved states.

The National Petrochemical and Refiners Association sent a letter to Senators Harry Reid (D., Nev.) and Mitch McConnell (R., Ky.) opposing a provision that would increase the Oil Spill Liability Trust Fund tax from 8 cents a gallon of crude oil to 41 cents a gallon. The bill passed by the U.S. House of Representatives on May 28 had increased the tax to 34 cents a gallon, which NPRA didn't oppose.

NPRA didn't oppose the tax 34-cent tax increase passed by the U.S. House of Representatives on May 28 to ensure that the fund was adequately financed to respond to future oil spills, said Charles Drevna, president of the refining-industry organization. This provision was passed as part of a broader jobs bill that extended unemployment benefits and various tax incentives.

Even with those levies on investment fund managers, oil companies, and some international businesses, among others the measure would add about $80 billion to the deficit over the next decade.

Debate on Medical Device Manufacturers Tax

Medical device manufacturers are bristling over a key provision in the nation’s new health care law which they say forces them to shoulder an unfair cost of expanded insurance coverage.

The companies say a 2.3 percent excise tax on medical devices like heart defibrillators and surgical tools for hospitals, health centers and ambulance services will cost them an estimated $20 billion in new taxes over the next decade. And they say that will force them to lay off workers and curb the research and development of new medical tools.

The tax, which doesn’t kick in until 2013, has also pitted the state’s two senators against each other. “Many small to midsize medical device companies will owe more to the federal government in taxes than they make in profits," said Mark Leahy of the Medical Device Manufacturers Association. It could have been worse: the initial proposed tax was $40 billion.

Sen. John Kerry, a Democrat, who helped arrange meetings between medical device companies and Democrats leaders in Congress to convince them to cut in half the original proposed tax hike, maintained there would be a benefit for the companies. He explained about the expanded marketplace for 32 million people who are going to buy the products.

The tax, which doesn't kick in until 2013, has touched a nerve in Massachusetts, the state that provided the blueprint for the health care law. Massachusetts is also a hub for medical device companies, with more than 200 firms calling the state home. It has also pitted its senators against one another.

California has the highest number of medical device workers with more than 72,400 followed by Massachusetts with nearly 22,000, Florida with nearly 20,000 and Minnesota with more than 18,000, according to industry estimates. Other states with significant medical device hubs include: New Jersey, Pennsylvania, New York, Texas and Ohio.

When the negotiations started it was going to be $40 billion and our industry negotiated it down to $20 billion.

G20 Implementation of Global Bank Tax

Canada may have scored a win at the G20 with the decision to let countries decide for themselves about whether to implement a bank tax, but there’s plenty more to fight over, opposition critics say. The G20 finance ministers agreed in Korea over the weekend not to designate a global bank tax, the funds from which would have been used for future bank bailouts.

They are pushing for stricter regulations, something the Canadian government and opposition parties’ support, but won't have a proposal ready until the November summit. Liberal finance critic John McCallum says the devil will be in the details, predicting debates over how much capital banks will require holding. The higher the capital ratios forced on the banks, the more secure the system is, but the fewer banks will be able to lend money in the short run.

So there will be a big debate about how high those capital requirements should be and also on how long they should allow the banks to implement them. Canada opposes the bank tax and deployed cabinet ministers around the world to lobby against it. Prime Minister Stephen Harper also discussed it in his meetings last week with British Prime Minister David Cameron and French Prime Minister Francois Fillon, who both support the tax.

The Tories argued having a safety net would let the banks make risky investments, knowing there was money available to bail them out. NDP finance critic Thomas Mulcair says he wants to see the government discussing a financial transaction tax with the G20, an idea supported by international development groups who want the world's richest countries to impose a 0.05% tax on financial transactions to fund humanitarian aid.

“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions,” the G20 said in a communiqué issued after the talks.

Attempts to introduce the global bank levy to fund future bailouts were ditched after opposition from Japan, Canada and Brazil, whose banks needed no public aid during the crisis. But the group said the financial sector should make a “substantial” contribution toward the cost of any rescue.

Los Angeles County Homeowners Tax Reductions

About 405,000 homeowners in Los Angeles County can expect to see lower property taxes later this year, the county assessor said Wednesday.

Those most likely to receive property tax reductions purchased their homes or condominiums after July 1, 2003, Assessor Robert Quon said, just as the housing market bubble began to inflate.

In some cases, however, tax reductions were made for some homes purchased earlier than 2003, including in Compton, East Los Angeles, Van Nuys, Paramount and Pomona. In hard-hit Lancaster and Palmdale, those who purchased homes as early as the 1980s may see tax cuts.

The average reduction for single-family homes is about $1,800; for condo owners, it is $1,500. About 290,000 houses and 115,000 condos qualified for the reduction. In Lancaster and Palmdale, which have seen a severe drop in property values, those who purchased homes as far back as the 1980s may see tax reductions.

The reduction in property taxes may be significant. For single-family homes, the average reduction in property taxes is about $1,800; the average savings for condo owners is $1,500. The reductions will be seen on property tax bills later this year.

New Hampshire Senate are Voted for LLC Tax

The New Hampshire Senate swallowed hard, but voted for a reasonable compensation bill that keeps the so-called "LLC tax" in place, at least for now. Only Sen. Jack Barnes, R-Raymond, voted against the bill in protest, but the rest of the Senate agreed to it, leaving the fate of the LLC tax repeal to budget deliberations in special session.

Repeal of the LLC tax did not make it into HB 1607 which deals with reasonable compensation that the House and Senate are voted. The whole debate over extending the interest and dividends tax to limited liability company distributions (more commonly known as the "LLC tax") focused attention on the reasonable compensation issue, but House members say the two are unrelated.

The New Hampshire House and Senate have passed legislation setting the amount state business owners are allowed to deduct for themselves as earnings, before they are taxed on profits. The bill sets $50,000 as a so-called "safe harbor" as reasonable compensation business owners can pay themselves without justifying it to state revenue officials.

The Department of Revenue Administration has been increasingly questioning such deductions, and the $50,000 threshold will lessen the fear among business owners, though most business groups think the figure is too low especially the $50,000 limit is per entity, as opposed to each individual in a business ownership. The compromise passed the Senate, 23-1. The House approved it with no debate and a loud "no," but the chair ruled that the motion passed.

Here are some other measures approved by lawmakers that will become law, unless prohibited by Gov. John Lynch:

• Under SB 408, trade groups and chambers of commerce would be able to form alliances to purchase health insurance for members. As a last-minute addition to the bill, the Insurance Department was told not to prevent leasing companies from using a group rate that would include many of its clients to buy insurance.
• Under SB 480, those who wish to appeal environmental board decisions would be able to only go to court over interpretation of the law, and not on matters of fact.
• Under HB 491, all things being equal, the state would give local vendors preference in bidding (with Department of Transportation contractors exempted), and those contractors that violated law in the last two years would be barred from bidding.
• Under HB 1168, a person would no longer be denied unemployed benefits for gross misconduct involving dishonesty but instead for a theft of more than $500, and only if that theft was connected to his or her work.
• Under HB 1239, developers would receive a timely permit from the state Department of Environmental Services, or their permits will be approved automatically (stricter conditions than contained in an earlier version that gave developers their money back.) Under HB 1380, developers also wouldn't have to pay for duplicate review from local planning board.
• Under HB 1267, municipalities would be able to force hawkers and peddlers to submit to criminal background checks in order to obtain a license.
• Under HB 1461, municipalities would be able to regulate sellers' display of martial arts weapons, with an eye of protecting marketing to children.
• Under SB 411, those with permits for large groundwater withdrawals would have to comply with local regulations.
• Under SB 420, insurers offering prescription drug benefits would be required to allow participants to use non-mail order pharmacies.
• Under SB 181, the Department of Safety, not the Liquor Commission, would be in charge of liquor licensing, enforcement and education. Licensing and education would start in July, but the enforcement switch wouldn’t take place until July 2011.