Study: Montgomery has lowest tax burden in region

A political operative once opined that “perception is reality.” While this is certainly true in the world of politics, facts are much safer for business owners to use as a path to success.

A stubborn perception persists that Montgomery County is “unfriendly” to business as a result of high taxes. The same perception has plagued the District of Columbia, as well, and they recently undertook a study comparing regional corporate rates. The results were truly eye-opening. The D. C. Tax Revision Commission contracted with an accounting firm to crunch the numbers for them.

The September, 2013, study, “Case Studies of Business Taxes in the District of Columbia: A Comparison with Neighboring Jurisdictions,” was authored by Robert Aceituno and Karen Yingst of Councilor Buchanan & Mitchell, P.C. As a method of conducting the study, the authors created a fictitious $30 million company and levied taxes based on current tax structures in D.C. and surrounding jurisdictions. What they found was that the D.C. tax burden for such a company was competitive in overall tax burden with surrounding jurisdictions. Of all the areas examined—Arlington, Alexandria and Fairfax in Virginia, Prince George’s and Montgomery counties in Maryland, and the District of Columbia—in fact, Montgomery County fared the best. Our overall tax burden of $216,378 stands in stark contrast to the highest burden in Arlington of $264,424—an 18% difference amounting to nearly $50,000.

Given the reality revealed by this study, why is the “high taxes” perception so often linked to Montgomery County so hard to shake?

“Most people don’t have the tools to evaluate the overall tax burden,” says Steve Silverman, director of the Montgomery County Department of Economic Development, “so they tend to focus on individual taxes. A number of factors go into determining that overall tax burden, including the type of company, the number of employees it has, any tax credits it might be eligible to receive—any number of variables, in fact. Any time you compare apples with oranges, your results are going to be skewed.”

The Councilor Buchanan & Mitchell report clearly illustrates this difficulty alluded to by Silverman in measuring tax competitiveness. Even though its study was geared toward determining D.C.’s standing with surrounding jurisdictions, it quickly became clear to the authors just how complicated the variables make that job.

The complete report is available online at the D.C. Tax Revision Commission’s website.

Meanwhile, the Department of Economic Development, working in concert with the Montgomery Business Development Corporation, has commissioned it’s own tax competitiveness study. Nothing is more effective than facts in knocking down widely-held and stubbornly false perceptions., DED’s website, will continue to provide information on this critical topic, along with regular updates through the eBiz Update newsletter and eBiz Alerts.

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