Comptroller Vows to Fight Slots, Computer Service Tax, Increase Enforcement Efforts

CAMBRIDGE: The folly of legalizing slot machines, a vow to seek repeal of a computer service tax and state efforts to make taxpaying fair for all through enforcement were among the topics Maryland Comptroller Peter Franchot discussed in remarks here during the annual Dorchester Chamber of Commerce dinner the evening of Jan. 18 at the Hyatt Regency Chesapeake Resort.

The comptroller first expressed his condolences for recent tragedies in Cambridge, the fire on Race Street and the death of a Cambridge youngster who was struck by a pickup truck while waiting for the school bus.

"Everyone is thinking of you around the state," Franchot said. "I commend the people of Cambridge for being able to pull together and show the kind of resilience and compassion that these events call for."

He also introduced Assistant Comptroller Len Foxwell, who was born and raised in Cambridge.

Franchot's remarks before the Dorchester Chamber of Commerce followed the State of the Treasury speech he presented that morning at the Chevy Chase Bank in Bethesda.

An annual requirement of his office, the State of the Treasury speech was made before business leaders instead of the political leaders in Annapolis because, Franchot said, members of the business community are shareholders in the state treasury

"You have helped build Maryland one of the strongest economies in the state," he said to his audience of chamber of commerce members.

He also made reference to predecessors William Donald Schaefer and Louis L. Goldstein, calling them, "The Babe Ruth and Lou Gehrig of Maryland politics."

Franchot said in filling the shoes of his legendary predecessors, he hopes to "have an independent voice, in the tradition of Louie Goldstein and the fiscal responsibility of Schaefer."

During his first year in office, Franchot said his office has worked to reward those who faithfully pay their taxes by aggressively pursuing those who do not pay their taxes

This Tax Fairness Initiative will continue to increase funds in Maryland's coffers.
"Over the next four years, the Tax Fairness Initiative will generate $200 million in revenue," Franchot said, "and once fully in place, it will generate as much as $100 million every year."

Through another program created in June, Franchot said, "we launched a unique partnership with the U.S. Treasury Department that allows us to intercept federal vendor payments to satisfy state income tax liabilities and vice-versa." He said Maryland is the only state in the country to have this federal vendor offset program, which is expected to recover around $20 million in its first year "and will ultimately allow us to recover millions in unpaid taxes owed to the state of Maryland and level the playing field for those vendors who are currently playing by the rules."
Chamber members applauded Franchot's criticism of the tax package recently enacted by a special session of the General Assembly and its potential to create problems in Maryland.

"We're entering the New Year on very, very shaky ground," Franchot said, with the national economy facing "profound uncertainties ... Economists are increasingly worried about the prospects of a national recession, and so am I."

The collapse of the subprime mortgage industry which ended the housing boom last year, high oil prices and foreclosure proceedings rising to an all-time high are all factors in this economic uncertainty, Franchot said, noting that the U.S. Commerce Department had recently reported that the decline in U.S. retail sales in December capped the worst year in that sector since 2002.

Franchot questioned the logic of increasing taxes now in Maryland and creating a new tax on computer services that is scheduled to go into effect July 1.

"I hope it is repealed," the comptroller said of the computer services tax, suggesting it could cause permanent damage to Maryland's information technology community.

"This technology tax, if allowed to stand, will erode Maryland's competitive advantage in the knowledge-based economy," Franchot said. "The computer services tax will take a disproportionate toll on those small and independently-owned businesses that are the backbone of strong communities."

Despite nationwide economic uncertainties, Franchot said Maryland is better positioned than most other states because of high-paying, high-quality industries such as the life sciences.

"A state that was once defined by its billowing smokestacks and industrial assembly lines is powered today by the microscope and the microchip, and we are the better for it," the comptroller said. "The work that is being done today in research and testing laboratories across this state is redefining the limits of human understanding, and will ultimately save and improve countless lives. It has helped make Maryland the wealthiest state in the union without further degrading our open spaces or polluting the Bay."

There was also applause for the comptroller's criticism of "the time-consuming obsession we have with slot machines" in Maryland.

Franchot warned that "there are no short cuts to prosperity."

He encouraged his audience to join him "in this good fight" and predicted, "that slots proposal is going to suffer a resounding defeat."

Warning about relying on future funding from slots, Franchot said, "it is hard to believe that the great state of Maryland stands one step away from opening its door to the national gambling industry and setting us on an economic course that is neither sound nor fiscally prudent.

"It has been proven, in state after state after state, that slot machines offer nothing more than false hope to desperate communities," the comptroller said. "They have destroyed families through addiction, bankruptcies and crime, and have left governments scrambling to cover their enormous social costs by any means necessary."

The complete text of the Comptroller's State of the Treasury Address can be found on the Comptroller's Web site at www.marylandtaxes.com.