On September 15, the Baltimore Sun ran a letter to the editor by Lawrence F. Haislip on the topic of controlling interests. I’m finally getting around to posting it here.

Closing ‘loophole’ creates a tax

Revising tax policy is never easy, and the temptation to look for the quick fix is strong.

Politics being what it is, one is prepared to make allowances when elected officials succumb to that temptation, and resort to emotion-laden but intellectually empty phrases such as “closing loopholes,” “tax evasion” and “fair share,” or suggest that greedy commercial property owners are allowed to “dodge taxes” and to “pocket millions” at the expense of “average taxpayers.”

But when the editors of The Sun speak in this same vein, they cheapen the public discourse on a matter of great public policy (“Close that loophole,” editorial, Sept. 6).

For many years, Maryland and its counties have imposed recordation and transfer taxes for the privilege of recording deeds in the land records offices. Today, the aggregate of these taxes can amount to 3 percent of the sales price of a property, which gives us one of the highest transfer taxes in the nation.

But not every recorded deed is taxable. Many exemptions exist, and these exemptions benefit individuals as well as corporations, partnerships, limited liability companies and other legal entities.

Many businesses structure transactions in such a way that no deed is required to be recorded so that no transfer and recordation taxes are paid.

But contrary to the implication in the editorial, there is nothing new about this; the concept has existed for decades.

What is novel, and pernicious, is the notion, to which the editors of The Sun apparently subscribe, that any commercial transaction that involves real estate and that does not involve the recording of a deed is somehow a fraud upon taxpayers of the state.

To see the true silliness of this notion, consider a simple analogy.

If the editors of The Sun decided to take a trip to New York by car along certain routes, they would pay road and bridge tolls the whole way up. This is only fair: The tolls are imposed on the users of the roads for their support and maintenance.

But suppose they took the train instead, and did not use the roads and bridges at all and therefore did not pay the tolls.

Would anyone seriously argue that the editors have arranged their travel plans as a “loophole” or “dodge” in order to “evade taxes” at the expense of the rest of us?

And would anyone seriously claim that the editors should pay their “fair share” of the tolls for use of the roads and bridges, whether they used them or not?

Let there be no mistake: Taxing transfers of controlling interests in real estate enterprises is not a mere technical fix; it is not the simple correction of a “loophole” in the recordation and transfer tax laws that was inadvertently and recently created by the legislature.

It would represent a new tax.

No one questions the power of the governor and legislature to create this tax - only the wisdom of doing so.

Lawrence F. Haislip
Monkton

The Maryland Chamber of Commerce opposes imposing recordation and transfer taxes on the transfer of a controlling interest in certain business entities that own real estate in Maryland for many of the same reasons outlined in this letter. This is a new tax on Maryland business entities that will complicate and detract from the Maryland business climate. Taxes similar to this proposed legislation exist in only a handful of other states. The Maryland General Assembly has wisely rejected similar proposals 12 times since 1990.