How Corporate Welfare Works in Maryland

lockheed martinAt this time of severe cutbacks in government funding for food stamps, early childhood education, and meals on wheels, some Maryland legislators are hard at work looking out for the welfare of one of the world’s wealthiest corporations.  Under a bill rapidly advancing in the legislature of that state, the Lockheed Martin Corporation will have the taxes on its luxurious Montgomery County hotel and conference center reduced by approximately $450,000 a year and will also receive a $1.4 million refund for the period since 2010.

Lockheed Martin would seem to be an unlikely recipient of this lavish government handout, at least on the basis of need.   Indeed, it is one of the world’s largest business enterprises, with sales that reached $47 billion in 2012.  It is also America’s largest defense contractor, and in fiscal 2012 its U.S. military sales topped $29 billion.

The effort to shovel millions of additional taxpayer dollars to this giant corporation goes back to 2010, when the state legislature passed a bill that exempted Lockheed Martin’s hotel guests from paying the state hotel tax.  Then, in 2011, the company asked to be exempted from the 7 percent hotel tax levied by Montgomery County, a suburb of Washington, DC.  Accordingly, the Montgomery County Council reviewed a bill that would change the definition of a hotel to exempt Lockheed Martin from this tax, too.  Nevertheless, after citizen testimony at a public hearing, the County Council refused to rewrite the law.  As a result, patrons of the hotel, grandly named the Center for Leadership Excellence, are forced to pay a lodging tax, just like patrons of all the other hotels in the county.

It should be noted that, when Lockheed Martin’s employees stay at the hotel, the company can usually pass on the costs to the appropriate federal contract.  Thus, in most cases, the federal government already compensates Lockheed Martin for any hotel tax it pays.

In 2012, Ike Leggett, the County Executive, spearheaded a new effort to subsidize Lockheed Martin by proposing that the corporation be given a no-strings “grant” of $900,000 to compensate it for the hotel taxes it paid in 2011 and 2012.  But the county’s legislative analyst suggested that providing such a grant, without any information as to the extent to which the company had already been reimbursed by the federal government, would not be advisable.  Ultimately, the County Council refused to allocate the grant to Lockheed Martin.

Lockheed Martin maintains that its conference hotel is a “private” facility, solely devoted to training its employees, and for this reason its guests should not have to pay the tax.  And it is true that Lockheed Martin decides who can reside there.

But the 183-room hotel is not, in fact, limited to Lockheed Martin employees.  It is available for contractors, vendors, and anyone else the company welcomes.  For example, the business school of the University of Southern California held a conference there in October 2012, with attendees offered the option of staying at the hotel for $225 per night or finding their own accommodations.  Benchmark Hospitality International, which manages the facility, advertises it online as “a private, full-service business-class lodging and conference center,” with a sports bar, fitness facility, lounge, and other amenities.

Faced with the unwillingness of the County Council to provide a multi-million dollar giveaway to this giant corporation, Lockheed Martin and its local enthusiasts have turned to the Maryland State Legislature for assistance.  Senator Nancy King, the chief sponsor of the new bill, argues that it is necessary to keep the Lockheed Martin hotel operating — although she has not specified why a corporation with $47 billion in revenues cannot manage this feat on its own.  She has acknowledged that, under the legislation, Lockheed Martin will be the only company throughout the State of Maryland that qualifies for the exemption from the hotel tax.

With the bill for tax exemption and a refund already approved by a Maryland Senate committee, it seems likely that the bill will be brought to the Senate floor for a vote on March 11.  Maryland’s House of Delegates will consider it thereafter.

lawrence wittner

Citizen activists, especially from Montgomery County, are outraged by what they are calling the “Corporate Welfare for Lockheed Martin” bill.  One of their leaders, Jean Athey, terms it “blatant corporate welfare for one of the wealthiest, most profitable companies in the nation.”  She asks:  “Why, in a time that WIC supplements for babies and pregnant women are being cut, when children are being deprived of Head Start, when unemployment benefits are being reduced . . . should one of the wealthiest companies . . . receive this kind of special tax favoritism?”

It’s a question well worth considering.

Lawrence S. Wittner

Monday, 11 March 2013

Comments

  1. Jonathan Baker says

    On the evidence that can be gleaned from the article, I would
    propose that Lockheed Martin employees who stay there not pay a hotel
    tax of any kind, since the facility is a private, corporate
    conference center. However, those who are not Lockheed Martin
    employees who avail themselves of lodging at the center should be
    required to pay the hotel tax, since, in that instance, the company
    is acting as a hotelier. The seems fair to both the company on the one side, and the state and county on the other.

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