Americans for Tax Reform

Grover G. Norquist President
1920 L Street NW • Suite 200 • Washington DC 20036
Phone (202) 785-0266 • Fax (202) 785-0261 • www.atr.org

February 14, 2005

The Honorable Bob Ehrlich
100 State Circle
Annapolis, MD 21401

Dear Gov. Ehrlich:

I am writing to urge you to oppose, and veto if necessary, HB1, the Public School Construction Assistance Act of 2005. It is a tax increase on the people of Maryland, it would damage growth and job creation, and it in no way represents the closing of an “unfair loophole.”

According to the fiscal note accompanying the bill, HB1 would be at least a $60 million dollar tax increase per year. It would drain resources out of the productive sectors of Maryland’s economy, and funnel those resources to the big spending interests in Annapolis. As the governor who ran on a platform to reverse Maryland’s history of profligate spending, you know now is not the time to open the tax-andspend floodgates.

HB1 would also slow economic growth and job creation. As a tax on corporations, HB1 would raise the costs for job creators. And as a tax on the transfer of corporate assets, HB1 could trap some businesses in the hands of less productive owners, discouraging their sale to new owners better able to grow a business.

Finally, the difference in treatment of transfers between personal property and corporate-owned property is not unusual or unfair. The natures of personal and corporate property are different, and as such they are treated differently in many ways. Residential property tax assessment growth is capped at 10% per year; business property tax assessments do not benefit from that cap. The sale of residential property is exempt from income or capital gains taxes if held for two years; the sale of business assets is taxed as capital gains. Residential property is generally taxed much more favorably than business property. Imposing the transfer tax on the sale of business property does not equalize the tax burden, it adds yet another burden to an already hard hit sector.

I urge you to oppose any action on this bill by the legislature, and I urge you to veto it if it makes it to your desk. HB1 is a tax increase that will harm Maryland businesses and families.

Onward,

/s/

Grover G. Norquist