Comptroller Franchot Worried About Mortgage Crisis, Economy and Taxes

By KATE ELIZABETH QUERAM, Capital News Service

BETHESDA (Jan. 21, 2008) - The continuing mortgage crisis and the country's declining economy, as well as the General Assembly's recently passed computer services tax, will pose problems for Maryland this year, said Comptroller Peter Franchot in his State of the Treasury speech Friday at Chevy Chase Bank Headquarters.

Franchot cited the collapse of the housing market, the decrease in the value of the dollar and slower retail sales as contributing factors to the nation's economic decline.

"While Maryland is blessed with a strong economic foundation, we know that we are not immune to national trends, and understand that things are likely to get much worse before they get better," Franchot said.

The comptroller also slammed the ongoing slot machine debate, saying the machines do nothing more than provide false hope to already desperate communities. He said the computer services tax will hurt small businesses and the state's business climate.

In the last year, Franchot implemented a number of programs to aid in collecting back taxes, including an online service that allows residents to voluntarily settle their delinquent payments. The state also began a crackdown on the collection of amusement taxes levied on money from equipment like video poker machines, and closed a loophole in captive Real Estate Investment Trusts that previously allowed corporations to decrease their state income tax payments.

In spite of these and other developments - which a spokesman for the comptroller estimated will net the state about $100 million - Franchot expressed concern that 2008 will be needlessly difficult for Maryland thanks to the actions of the General Assembly in its November special session.

"I publicly objected to the idea of writing complex tax legislation in a frenetic and overheated political environment," 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. Furthermore, the way in which it was adopted will inevitably diminish Maryland's hard-earned reputation as a good place to do business."

The tax should be repealed, Franchot said. He said the state is close to legalizing gambling, an action Franchot feels would lead to the demise of small businesses and place additional financial burdens on the state's resources to cover debt and bankruptcy.

During the special session, the legislature agreed to put a referendum on slots on November's ballot.

Gov. Martin O'Malley's deputy press secretary, Christine Hansen, declined to respond to Franchot's speech, saying the governor will give his own State of the State speech Wednesday.

But Franchot's positions were well received by the audience of nearly 100 Friday.

"I'm very pleased with what he's done so far," said Linda Guest, of Bethesda, who finds the computer services tax absurd. "Other jurisdictions and states have thrown it out because it doesn't work."

Robin R. Talbott of Rockville agreed.

"[The tax is] going to keep people from moving to the state," she said. "I loved the speech."

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